Buying a Franchise? Do You Really Know the Franchisor?
by Ed Teixeira
If youíre focused in on buying a particular franchise, itís important to
be familiar with the franchisor and how the staff performs before signing the
A franchise is the start of what should be a long term relationship. Most new
franchisees are committing to a franchise term of ten years, with an option for
another five years. During this period, a franchisor and its franchisees can
face unexpected challenges. Some will arise during the normal course of
business, while others can crop up unexpectedly.
When franchisees face problems they will often seek assistance and support from
Since a franchisee must operate its franchise according to the terms of the
franchise agreement, itís important to understand how the franchisor administers
the franchise on a day to day basis. You should develop a profile of the
Here are some tips that can help you get to know how the franchisor operates
before executing the franchise agreement:
- The way a franchisor handles the sale of new franchises can
reveal quite a bit about the franchisor. Using franchise brokers
versus in house sales staff may indicate that the franchisor is
looking for fast growth or may lack the capital to fund its own
Poor performance by the franchisor in this area can be a red
- Use discovery day to gain more insight regarding the
franchisor. When you ask questions and attempt to negotiate
terms of your franchise agreement, it will be an opportunity to
learn more about the franchisor.
Note: If the franchisor staff is aggressively trying to sell the
franchise it can be a ďred flag.Ē Typically, a solid well
managed franchise company wonít take this approach.
- Your most credible source of information about the
franchisor will come from existing franchisees. During your
conversations with existing franchisees, itís normal to focus
your time on the operational aspect of the franchise. However,
itís important to use this opportunity to develop a profile of
the franchisor. Here are some questions that you should ask:
- Has the franchisor delivered as
- If no, what happened?
- Have you had a need to seek assistance
from the franchisor and if yes how did they
- Do the franchisor staff and senior
management respond promptly to e-mails and phone
Purchasing a franchise is an important and life changing decision. The
franchisor is an integral part of the franchise relationship so itís important
to gain as much knowledge about the franchisor as possible. Itís important for
you to ďknow the franchisorĒ before signing on the dotted line.
© 2013 FranchiseKnowHow, LLC
Ed Teixeira is the President of FranchiseKnowHow, LLC. He can be reached at