Exploring a Franchise Opportunity? 5 Key Questions to Ask.
A franchise lets people experience the freedom of business ownership with the security of operating with a proven business model.
A prospective franchisee learns more about this financial operation and embarks on a discovery process. As a franchise coach, I like to prepare candidates with what to expect from such initial exchanges and some key questions to ask.
Once you request information from a franchisor, a franchise representative will follow up with you promptly. At this point, your franchise-discovery process begins, and the two parties will start to get to know each other. This begins a mutual elimination process as the two sides check each other out to see what the other brings to the table and what he or she is looking for.
A franchisor will want to know if you have what it takes from personal, professional and financial standpoints. As a franchise candidate, you'll wish to know if operating a franchise provides the means to an enjoyable work life, an attractive financial return and a balanced lifestyle.
After mutual exchanges of initial information, and if no roadblocks are identified right away (like the franchisor is not operating in your market or you just filed for bankruptcy), expect to receive an overview of the franchise concept over the phone or by email.
The franchisor will undoubtedly provide the big picture and move into more details in subsequent conversations. With a well-structured discovery process, you’ll know the steps involved and the approximate time frame it takes to complete them.
Plenty of questions will fly back and forth, but here are five that should be on any serious franchise candidate’s list:
1. How does this franchise work? Discuss with the franchisor what's the core business, what the company sells, who are the targeted customers and how they are attracted. Ask if a franchisee is expected to be a full-time operator or if a semi-absentee model applies.
After receiving the overview of the company, expect more detail in follow-up communications about the operational details, marketing, software and technology, real estate (if applicable) and other relevant business elements.
2. What training and ongoing support is provided franchisees? After gaining a basic understanding of the business and how it works, you’ll want to learn about initial training and ongoing support for franchisees.
Find out how long the training takes and where it's provided: online, in a classroom or in the field. Inquire about mechanisms for continued support.
A franchisee should not feel it's a mystery to figure out where to go for help when questions arise.
3. What is the company's competitive advantage? Figure out what makes this franchise stand out from its competition.
Ask who the competitors are and what this franchisor does better or differently from other players in the field. This will help you determine what makes the franchise's offerings attractive to a potential owner and prospective customers.
4. Does the company have a standardized operating system? One of the biggest advantages of working under a franchise model is not having to reinvent the wheel. Figure out if all the kinks have been worked out in daily business operations. Find out if there's consistency throughout the system so that customers in your local market receive the same experience as those in other regions.
5. What's the real cost of buying this franchise? Ask about other initial fees (beyond the franchise fee) that may apply for training, software or territory. Gain a firm grasp of the total investment involved. Find out the up-front expenses for opening the business and if you must have to pay for the grand opening's marketing.
Learn how much cash you should have in the bank to cover operating expenses until the business breaks even. Find out all financial obligations.
Enjoy your exciting exploration of franchising and keep an open mind as you discover the possibilities.
Editor's note: This piece has been updated to clarify that this initial discovery process takes place over the phone and by email.