Ten Questions Franchise Candidates Shouldn't be Afraid to Ask
by Ed Teixeira
Before signing on that dotted line and paying the franchise fee there are
certain questions that the franchisor should be asked. If youíve already
considered asking these questions kudos to you, however, chances are youíve
Despite the amount of resources available to franchise candidates, mistakes
continue to be made and franchisees can and do fail. Although there are no
guarantees to success, individuals can lower the risk of failure by adding
certain questions to their franchise evaluation process. Here are ten questions
that a prospective franchisee should ask the franchisor. I would suggest you ask
these questions during various phases of your evaluation and donít be reluctant
to ask more than one member of franchisor staff the same question. Some
questions are open ended and as such you should pursue until youíre satisfied
with the answer. If you observe hesitation on the part of franchisor staff to
answer or provide an adequate response these can be red flags. Finally, try to
confirm the answers when you speak to franchisees.
- Do you disclose franchisee financial results? If not why?
Although the franchisor wonít acknowledge it, a reason could be
related to poor franchisee performance.
- Do you have an independent franchisee association? If no
then why? (note: start-up or small franchisors are most likely
to say no because of their small size)
- Have you assisted any franchisees financially? If yes what
steps did you take?
- If I do what Iím told to do when operating my franchise and
find myself having financial problems can I expect some
assistance from the franchisor?
- Why were the franchise agreements listed in the FDD
- Can you give me a time frame when you expect a new
franchisee to reach breakeven?
- What are the key 3-5 requirements for operating a successful
- What is the source of franchisor working capital? My
accountant didnít see any information in the financials
indicating a credit line or possible other sources.
- Have you done or do you conduct a market study for franchise
territories? If not why? As a franchisor shouldnít you be
knowledgeable about your major competitors?
- How is the advertising fund administered? Are there
franchisees involved? If no then why not? If yes who are they?
Since the franchise evaluation process can be critical to your future success
as a franchisee itís important to gain as much information as possible. If you
fail to get a satisfactory response to these and other questions consider
walking away from the franchise.
© 2011 FranchiseKnowHow, LLC
Ed Teixeira is the President of FranchiseKnowHow, LLC. He can be reached at
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