Deciding to buy into a franchise is a big decision. One you should never take lightly. Besides the initial internet searches to get some basic information you should set up interviews with franchisors and franchisees to get a fuller of picture of what to expect and what each potential relationship could offer you. You should also have a long deep conversation with yourself about what you really want and what you can realistically handle.
After talking to a franchisor, make sure to ask for contact information for some of their franchisees. They will be able to give you a better idea of what it is like on that side of the relationship. They can give you an inside look at how the franchisor treats franchisees and how well current franchisees are doing.
Here are the most important franchisees questions to ask:
How would you rate the franchisor?
While the franchisor can directly give you a lot of good information, their franchisees are better at giving an honest evaluation of the franchisor’s performance. Make sure to ask if the franchisee is satisfied with their relationship with the franchisor and what they are like to work with. Specifically ask how much support they give. Are they pretty much hands-on or do they just give minimum training in the beginning and then just collect their fees?
Ask if the franchisor provides an open line of communication and listens to the ideas and concerns of their franchisees? Have they fulfilled all their promises?
Have you made the profit you expected to make?
Don’t be afraid to talk frankly about numbers. See if they are comfortable being totally transparent with you about their unit’s gross revenues and cash flow. Ask if they have made the profit they expected to make. Also be sure to ask what their pre-tax profits have been for the last three years. These numbers will help give you a better picture of whether these franchises are profitable.
So many times, franchisees are unfortunately caught off guard with all the start-up costs and working capital required so ask them to tell you honestly what money you need to set aside for all this and how long you should expect it to take to break even. While your experience may not be exactly like theirs, knowing what could happen will help you decide if this is a road you really want to take.
How much training did you receive?
All franchisors give some training to their new franchisees, but it tends to vary across the board. If this is your first time owning a business, then you especially will want a lot of support up front. Ask the franchisees what type of training they had, how long it lasted and if they are given a mentor they can reach out to when they have questions. Ask them to be honest on whether they felt the training was effective or not and if they thought there was enough training.
What is the supply chain process like?
Ask the franchisees you are able to talk to about logistics as well. Find out what supplies and services you are expected to buy from the franchisor and what that process is like. Does the franchisee feel like he or she gets enough supplies in an adequate fashion? Are the products and services you are expected to sell of good quality? Is there a positive customer reaction? Also don’t forget to ask if they feel like they are getting a good price from the franchisor or if they feel like they could getter a better price on their own?
What are daily operations like?
Other good questions to ask include questions about the effectiveness of operational procedures? Are there a lot of rules to follow? Will you be given any operational manuals to follow? Are they well-written and easy to understand? How much freedom are you given to make your own decisions? Is there room for you to implement your own ideas?
How much assistance do you receive for advertising and marketing?
Some franchisors will offer you assistance with advertising and marketing. Many will even have national and regional campaigns that you can participate in. Find out how this franchisor handles advertising and marketing and whether their franchisees feel it is effective or not? Get a good idea of how much it will cost you a month and whether what they provide will be enough to help you attract new customers.
Are you happy with your decision to own a franchise business?
Find out about the quality of life other franchiser owners have. Ask them what they did before owning the franchise and how it compares to what are they doing? Is life more balanced or more stressed? How many hours a week do you work? Do you have more flexibility now as a business owner? Ask them what parts of being a franchise owner they love and which parts could they do without? Are there certain common problems that constantly pop up that you should be aware of? Overall, are they happy with their decision to own a franchise business? Would they make the same decision if they had a chance to do it again? If they are not, that is a red flag that maybe you should get more information about this franchise before making any final decisions.
Also share a little bit about your experience and what you are looking for and ask the franchisee if they would recommend that get involved in the business as well.
Remember that this is not the time to be shy about franchisee questions. Ask as many questions as they are comfortable with and take a lot of notes. Once you have talked to at least two or three franchisees per franchisor then it is time to sit down and compare the answers to what you are looking for. Be honest with yourself about what type of support you will need and how much capital you need to get started. Also, consider your personality and whether or not being a franchisee is a good for you. If you know you are very strong-willed, for example, and prefer making your own decisions, then you might be better off starting your own business from scratch.