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January 16, 2024

Tough Questions You Should Ask Potential Franchise

Tough Questions You Should Ask Potential Franchise

Financial Performance
   - Can you provide detailed financial performance data for existing franchise units?
   - What are the average startup costs, and what additional ongoing expenses should I anticipate?

erritorial Rights and Competition
   - How is the territory determined, and what exclusivity can I expect?
   - What steps does the franchise take to address or mitigate competition among its own franchisees?

Franchisee Support and Training
   - What kind of training and ongoing support do you provide to franchisees?
   - Can I speak with existing franchisees to understand their experiences with training and support?

Renewal and Exit Policies
   - What are the terms and conditions for renewing the franchise agreement?
   - What happens if I want to sell my franchise? Are there restrictions or conditions?

Litigation and Disputes
   - Have there been any legal disputes with franchisees, and if so, how were they resolved?
   - What mechanisms are in place for dispute resolution between the franchisor and franchisee?

Marketing and Advertising
   - How is the marketing and advertising fund managed, and how are funds allocated?
   - Can you provide examples of successful marketing strategies employed by the franchise?

Performance Expectations
   - What performance expectations do you have for franchisees, and how are they enforced?
   - How are underperforming franchisees supported, and what actions are taken if they continue to struggle?

Technology and Innovation
   - How does the franchise stay current with technology trends and innovations in the industry?
   - Are there plans for future updates or changes to the business model?

Exit Strategy and Succession Planning
   - What is the franchisor's long-term vision for the franchise system?
   - How is succession planning handled, and what safeguards are in place for franchisees in the event of a change in leadership?

System Growth and Saturation
    - What is the growth strategy for the franchise system, and how do you ensure it won't become oversaturated?
    - Are there plans to expand internationally, and if so, what support will be provided to franchisees in new markets?

Supply Chain and Vendor Relationships
    - How are vendor relationships managed, and what efforts are made to secure favorable terms for franchisees?
    - Are there exclusive deals with certain suppliers, and if so, how does this benefit franchisees?

Adaptability to Change
    - How does the franchise adapt to changes in consumer trends and industry regulations?
    - Can you provide examples of how the franchise has successfully navigated challenges or disruptions in the past?

These tough questions are designed to dig deep into various aspects of the franchise opportunity and help you assess its viability, potential challenges, and the level of support provided by the franchisor. Remember to review the franchise disclosure document (FDD) thoroughly and seek legal advice before making any commitments.

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