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5 Questions you should ask the franchisor

April 26th, 2017 by Brittany Lamb in Franchise Tips
 

5 Questions you should ask the franchisorSpeaking to franchisors is an important part of the due diligence process when looking to invest in a franchise. This will be your opportunity to speak openly about your queries and discover if this franchise is the one for you.

Here are 5 questions you should be asking the franchisor

What is the total cost of the franchise?

It is important you know how much you will be investing into the business in total. Most franchises will require an initial franchise fee and an ongoing fee. But also keep in mind set-up costs, marketing costs, working capital and legal fees. As each franchise operates differently, make sure you ask for the total investment cost (including VAT).

What support do you provide your franchisees?

As a franchisee, your franchisor is there to support and train you. Many franchisees come from a different sector than they invest in so it is important you are supported in all areas as necessary. This may include support in winning customers, marketing or key skills needed to do the job in hand. Find out how this training and support is given and how long the initial training will be.

How much can I expect to earn?

As for any business, it may take some time to get your franchise off the ground and start making a profit. Ask the franchisor what the reasonable estimate is for potential earnings. This will also help to tell you how long you can expect to work the franchise until you start seeing a return on your investment and how many years you will be investing.

May I speak to existing franchisees?

You want to be able to get a full understanding of the business from all viewpoints. Often franchisors will encourage you to speak to existing franchisees and you should not pass up the offer. Ask the franchisor who to speak to and how you can get into contact with them. This way to you can get an understanding from someone who has been in your position and is now working in the franchise you are interested in.

What will happen when the Franchise Agreement comes to an end?

Although you will just be starting out, it is important to keep in mind your exit strategy for when the time does come. Franchise agreements are often 5-10 years long but can be longer depending on the type of business and level of investment. You will want to ask the franchisor whether you will have the option to renew, or if you are able to pass on the franchise to someone else if that is part of your plan.

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