Essential questions to ask before buying a franchise

You should ask a franchisor before becoming a franchisee. Compiled by The British Franchise Association

Investing in a franchise is usually one of the more significant purchases of a franchisee’s life - financially, personally and emotionally.

Even if you’re not investing your life savings or taking out a substantial loan, the decision to invest - whatever the driving factors are - is a critical one, and one which should involve a great deal of research into the brands you’re looking at.

When you meet a franchisor face to face, make sure you get as much information from them about the concept as possible. Any franchisor worth their salt will not only be happy to answer your questions about the company and franchise offering, they will positively encourage them. Knowing you are serious about the business, have taken time to prepare for the processes involved and are keen to find out as much as possible about the franchise are signs all franchisors should be looking for in their potential recruits.

You should never feel you have to shy away from asking a question, and should carefully weigh up and assess the responses. To help guide you, here are some suggested questions you should be asking the franchisors you are looking to invest with:

On the franchisor’s business
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* How long have you been in franchising?

* Can I speak to some of your current franchisees? And can I choose who I speak to?

* Can you demonstrate that you provide the necessary follow up support services?

* How many business failures have been experienced by your franchisees?

* On what basis do you choose your franchisees?

On finances
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* How much does your franchise cost, what does this price include and what capital costs will be incurred in addition to this price?

* How much working capital is usually required?

* What will be the gross profit margin and what costs will I incur in arriving at a net profit? Do these figures take my salary and depreciation into account?

* Can I see actual accounts that confirm your projections?

* Did you run your own pilot schemes before franchising? If not, why not?

* What help can you give me in organising finance and a business plan for the banks?

On methods
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* Is the business seasonal?

* When is the best time to open?

* What ongoing management fees do you charge?

* Do you take any commission on supplies of goods or materials? Do I have to purchase all or just selected items from you? Does this apply to equipment?

* Will I be obliged to maintain a minimum fee or minimum purchase of goods? What happens if I fail to meet this commitment?

* What advertising and promotional fees will I pay and what do I get for that outlay?

* Do you train me? Who pays for my training? Where do I go for training?

* What ongoing support services do you provide after the business has commenced?

* May I have a copy of your franchise contracts?

* What restrictions are there that affect my rights to sell the business?

* For how long is the franchise granted?

* What happens at the end of that period?

On your involvement
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* What will happen if I don’t like the business? Upon what basis can I terminate the contract?

* Who will be my link with you after I have opened for business?

* Can I meet some of your head office staff?

* What point of sale and promotional literature do you supply and what do I have to pay for it?

* Are there traditional opening hours?

* How soon will I have to spend money on replacing equipment?

* Will you find me a site or do I have to find it?

On communications and operations
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* What systems do you have for keeping franchisees in touch with you and each other? Do you publish a newsletter or organise seminars?

* What help will I receive with regards local advertising and promotion?

* What exclusive rights do I receive?

* How will I cope with my bookkeeping?

* What can I sell and what can I not sell?

* Do you provide instruction and operations manuals?

* What would happen if you misjudged my business and it did not produce the anticipated figures, but resulted in a loss?

* What would happen if I ran into operational problems I was not able to solve? What help would I receive?

How can I be sure you will do what you promise?
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* Is your company a member of the British Franchise Association? If not, why not?

* By using your judgement on the answers you receive, you’ll be in a good position to assess the suitability and viability of the franchise you’re interested in. And don’t forget, this is just one reason why you should speak to the network’s franchisees as they’ve been a part of the business for some time and will be able to help you determine the answers you’ve been given hold true.