Franchise Buying Guide

Interview Both Sides of the Franchise Equation

Questions to Ask Current Franchisees
Presented by Guidant Financial
Guidant Financial specializes in helping entrepreneurs purchase new franchises using their retirement funds.

You owe it to yourself to talk to as many current franchise owners as you can. Just get in the car and head out to see them. You'll find names, telephone numbers and addresses right in the FDD (Item 20).

Franchisees' view of the franchisor and the value of the franchise system will be enlightening. Make sure you interview a large sampling of franchisees. Some will have good experiences to report; others may preach doom and gloom. Remember, no one can predict how you will fare or whether you'll enjoy the business, but you need to know the mood of the existing owners before you join their club.

Make sure you visit franchisees at a good time of day. If you show up at a fast-food restaurant at noon, don't expect to get anyone's full attention. By all means, arrive at noon, watch the operation during the lunch hour, and arrange to see the owner later that afternoon, when things quiet down.

Use the visit to follow up on the information you read in the FDD. As lengthy as that document is, it still doesn't tell the whole story. You have to piece that together for yourself. Bring a list of questions when you visit franchise owners. Some questions you may want to ask include:

  • Was the training the franchisor offered helpful in getting the business off the ground?
  • Is the franchisor responsive to your needs?
  • Tell me about a typical day for you.
  • Have there been problems you didn't anticipate?
  • Has your experience proved that the investment and cost information in the FDD was realistic?
  • Have you incurred any hidden expenses?
  • Are the advertising fees reflected in the marketing support (for example, local advertising or in-store signage) that you receive?
  • What are your sales patterns like? Are they seasonal? If so, what do you do to make ends meet in the off-season?
  • Have your sales and profits met your expectations? Tell me about the numbers in the business.
  • Are there expansion opportunities for additional franchise ownership in this system?
  • Knowing what you know now, would you make this investment again?

Since running a franchise involves an ongoing relationship with the franchisor, be sure to get details on the purchasing process-everything that happened from the day the franchisee signed the agreement to the end of the first year in business. Did the parent company follow through on its promises?

Don't hesitate to ask about sensitive topics. One of the most important questions a prospective franchisee should ask, but rarely does, is "What conflicts do you have with the franchisor?" Even established, successful companies have conflicts. What you need to find out is how widespread and common those conflicts are.

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