Buying a franchise can be complicated, but with our guidance and focus on the top 10 must ask questions, the process is simplified.
There are literally thousands of franchises available these days and knowing how to find the best one for you can be overwhelming. At TC Franchise specialists, we work with about 500. Why only a fraction of them? We have done extensive research and feel comfortable recommending these to others. When helping to find the perfect franchise for you, it helps to know which ones to discard just as much as which ones to include.
We also encourage people to practice the same due diligence when purchasing a franchise that you would with any major investment.
Here are the top 10 must asked questions we strongly recommend people ask before getting involved in a particular franchise operation:
- What are my upfront costs and what’s included in the fee? This is the most obvious initial financial question.
2. What other fees should I plan on paying? You may be required to lease property or equipment from the franchisor. You may have to pay the franchisor a percentage of your annual sales. Those numbers must be cranked into your own equations when you’re trying to figure out if a franchise deal makes sense.
3. How is the franchisor making money? Franchisors may make money by owning their own establishments, by providing services to franchisors, by simply collecting royalty payment or by some other combination. It’s tough to make a blanket statement about whether one model is better than another, but surely you want to know where the franchisor’s own interests lie.
4. What restrictions do I have on suppliers? Are you going to be required to purchase certain goods or services from particular vendors and/or from the franchisor? If certain purchases are required, are they going to cost you more than you would otherwise have to pay if there were no restriction on where you could buy them?
5. What kind of regional protection am I getting? Do you have any guarantees that the franchisor isn’t going to sell other franchises or open up its own outlets in your geographic area? If so, how long are those guarantees good for?
6. What kind of empire-building opportunities do I have? The flip side of the previous question: Do you get first dibs on new franchises in or near the same area as your first franchise? Some of the most successful franchisees are those who own multiple outlets in the same area and are able to develop their own economies of scale.
7. What kind of training and support do I receive? A good franchise will include solid training and ongoing follow up / mentoring practices. Franchises know their success is based on your success, so they should be proactive in teaching you the business right from the start.
8. How many franchisees sell out in a year? A franchisee that gets out of the business by selling to someone else isn’t necessarily a failure. Indeed, he or she may be selling a successful venture. But you still need some idea of the turnover rate of franchisees.
9. What’s the value of a re-sold franchise? Another way of looking at the prospects for franchisees is to look at what happens to those who sell their establishments. What did they get for the re-sold franchise relative to what they put into it? Was it a profitable investment, or were they simply looking to get out and cut their losses?
10. What are the terms of me selling my franchise? What if you got sick, or had to move quickly for family reasons? Can you sell to anyone, or do you have to deal with the franchisor? Would the company charge you something to sell your franchise or otherwise restrict your ability to pull out of the business?
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