Get all your questions answered. Evaluate the answers and how you feel about the answers. Remember you next need to do your validation calls with the other franchise owners and see what you think, Remember nothing in life will make you 100% happy. If you are satisfied with 70% or more of your answers you are probably in good shape.
Here is where your Franchise Consultant will come in to place. Any concerns you have about the answer to receive on these questions should be discussed with your consultant. Also, I would discuss the answers, but you have concerns with other franchise owners in that franchise system to see if your concerns are valid and intolerable.
Here are some questions that you should ask on your initial introductory call with a franchisor:
- What should I know about joining your franchise system?
- What are the strengths of your franchise?
- Where do you see this franchise system in 5 years and what steps are being taken to reach that goal?
- Is the business scalable?
- How are you viewed in the consumer marketplace?
- Do you have an item 19 in your Franchise Disclosure Document and can you speak to the revenue/net profit numbers? If not, how can I find out these numbers?
- Who are your biggest competitors and what is your market advantage?
- What are your plans to develop my state and how will that impact my franchise?
- How vulnerable are you to a recession?
- What types of events/developments can derail the business?
- What is your client retention rate?
- How do your franchisees recruit, train, and retain labor?
- How do you measure the effectiveness of your marketing?
- How do you define territory?
- Does the franchisor have sources to assist with financing, real estate, and construction?
- What certifications or licenses, if any, do I need?
- What is the biggest complaint from your franchisees?
- Are your top 3 franchisees available to speak with me?
- Do I need permission if I want to market my business through any trade groups?
- If I do sell my business and leave the franchise system, what am I forbidden to do?
Here are some helpful questions that you may find helpful on a Franchise Disclosure Document (FDD) review call:
- Can you give me a breakdown of all of the expenses associated with getting started?
- What are the startup costs?
- What are the operating costs?
- What are the marketing/advertising costs?
- What percentage of your operating costs are labor?
- What are the triggers for hiring additional staff?
- Please explain the contractual responsibilities if I join your franchise system. (i.e. length of agreement, renewals, etc.)
- What does your training program look like?
- What ongoing training do you offer?
- How much additional capital will I need after I launch my franchise?
- If applicable, what goods or services do I have to purchase directly from you, the franchisor, and can I competitively shop for a better deal?
- Is there an advertising fund that I must contribute to? And, what rights do the franchisees have regarding auditing that fund?
- What is my protected territory and how is it defined?
- How many franchises have been awarded in my state and have they all opened? If they haven’t opened, why not?
- How many franchised units have failed and why?
- How can advances in technology help or hinder the growth of the business?
- Has the franchisor been sued or being sued?
- How have previous franchisee/franchisor disputes been settled?
- How have most franchisees located their franchise locations? Did they use the franchisor’s contacts or did they find their own help?
- What will you do to help make sure that I am properly set up to run my own business?
- What happens when I want to retire or sell my business?
