Franchise 500

What to Ask Before You Buy a Franchise

What to Ask Before You Buy a Franchise
Image credit: Leo Reynolds | Flickr
This story appears in the January 2015 issue of Entrepreneur. Subscribe »

We pack a lot of data into the Franchise 500®, but there’s an additional crucial resource: franchisees. Sure, we take into account the number of units open from year to year, as well as closures, resales and even the number of lawsuits filed against a franchisor. But it’s easy to lose sight of the fact that behind all those numbers are real people—the franchisees who are on the ground facing everyday challenges to make their businesses succeed. And if you’re hoping to become one of them, they are your most valuable source of information.

By all means, consider the Franchise 500® as a first step in your research. It’s got a wealth of data to get you started on the path to finding a strong franchise system. But don’t get so caught up in statistics—whether they’re here or in a company’s Franchise Disclosure Document (FDD)—that you forget that your goal isn’t to become a number; it’s to become a success. Only you can define what that means. Other franchisees, the people who’ve been there, can help you figure out whether a particular system will help you achieve that goal. Call and visit as many of them as you can. 

Here are a few questions you can ask when you make those connections.

How much money can I make?

Knowing that this question is at the front of most prospective franchisees’ minds, more franchisors are choosing to make earnings claims in Item 19 of the FDD. But the picture presented is often incomplete, showing only average sales (not profits), sales for a select few franchises or sales for company-owned units instead of franchises. 

Fill in the gaps when you’re talking to franchisees. Ask them not only about their current sales and profits, but how consistent those numbers have been from year to year and how long it took them to turn a profit.

What’s it really like to be a franchisee for this company?

Company culture can’t be quantified, but it’s just as important as money when considering which franchise to buy. Get an idea of whether the franchise is a good fit for your personality and goals by asking franchisees if they’re satisfied with the system and what they would change if they could. Get their thoughts on the training and support offered. And find out how much input and flexibility they’ve had in how to run the business.

You’ll also want to find out what a franchisee’s day-to-day is like. Is their role more hands-on or behind the scenes? Do they have employees, or is it a one-man show? How much of their time and energy does the business really take? Get a picture of what it’s truly like to be a franchisee—and then do some soul-searching into whether it’s something you would be good at and enjoy.

What would you do differently?

Don’t miss the opportunity to learn from others’ mistakes. Even successful franchisees may have stumbled a few times starting up, and their experience and advice about what works—and what doesn’t—could prove invaluable. 

And don’t just talk to existing franchisees. In their FDDs, companies are required to include a list of franchisees who have left the system in the last year. Seek out the perspectives of former franchisees, and carefully consider whether any problems they encountered might have an impact on you, too. 

No matter who you talk to, don’t be afraid to hear the negatives. They will either strengthen your resolve that this is the right opportunity for you and teach you about pitfalls to avoid, or they’ll steer you away from a franchise system that’s not a good fit—and that’s the first step toward finding one that is.

Edition: October 2016

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