As much as a franchise might help ease you into business, choosing which one to buy is a major decision that will shape the course of your life. For those of you who want to buy a franchise but aren't quite sure where to start, look no further--we went out and did the legwork for you. We asked franchisees, franchisors and experts what they consider to be the top questions across all categories, including money and financing, personal satisfaction with the franchise, finding a business with the right fit, and system issues. To help you on your journey, we've compiled a list of the top 10 questions to ask yourself, franchisors and existing franchisees.
And just to give you one more helpful nudge, we even got the inside scoop on how to interpret the answers you receive. So fire away. After all, it's your due diligence from this point on that will really determine your future success.
1. Is it a good product or service?
When Luigi Cruz purchased his Beard Papa's franchise in San Francisco in March 2005, he moved through the process confidently because he fully believed in the product. It was important for him to know that the cream puffs he was basing his franchise on would measure up. Cruz, 44, wanted a product that was unique yet already somewhat familiar
to consumers and, most important, had staying power. "A unique product means it cannot be copied easily," says Cruz, who researched the brand and found that it started in Japan in 1994 and had already expanded to more than 250 stores by 2005. "[You have to find out] who your direct competitors are and what your market share will be."
Michael H. Seid, managing director of Michael H. Seid & Associates, a management consulting firm specializing in the franchising industry, urges potential franchisees to take the question one step further and inquire: Does the product have consumer acceptance? Is the product or service just a fad, or is it likely consumers will want this product or service for years to come?
Questions To Ask Yourself:
2. Do I have the skills franchisees need on a daily basis, and do I have the temperment to follow the directions of the franchisor when operating the business?
Assessing whether you possess the right management, marketing and communication skills is crucial, says Lisa Ruddy, the first franchisee of The Original SoupMan. You should also possess people skills and be able to make decisions and adapt to change, she says. "It's important to be able to follow directions because you are part of a system, and consistency is important in [franchising]." Even so, for newer franchises, this might not always be the case. Ruddy, 38, warns that franchisees who are buying into less established systems--as The Original SoupMan was when she opened hers in Princeton, New Jersey, in October 2005--need to be proactive about growing their individual franchise and offering suggestions to the franchisor on ways to improve the system.
3. Do I have the financial means to grow the business and reinvest in it when necessary?
For Ruddy, the spending did not end with The Original SoupMan's franchise fee. By the end of the first year, Ruddy had replaced her location's air conditioning system and improved the menu boards and menus. By year two, she had repainted the store and replaced the tile floor. While these changes weren't essential to keep the business going--nor are the holiday staff parties or bonuses she offers each year--they were expenses that Ruddy deemed necessary. "Not all businesses make money as soon as they open their doors," she says. "Sometimes you need to spend money to make money."
4. Will the franchise help me reach my business and personal goals?
This is one of the most important questions to ask, says John Reynolds, president of the Educational Foundation at the International Franchise Association, yet it can only be answered by you. "Having a clear sense of what you want to get out of the business--both financially and personally--helps evaluate the question of how much you are willing to put into the business in terms of personal commitment, time and money," says Reynolds. "For example, a person who's retired with a comfortable pension, just looking for a little extra money and something to do a few days per week, is very different from a person looking for a business that will support his family, help put his children through college and provide a big return on his initial investment."