This might be your first foray into franchising; a tentative glance into the world of self-employment. Or you might be excitedly reading through a selection of franchise brochures, while also a little nervous about that leap into the unknown. Maybe you’re 100% ready to commit, unswerving in your desire to work for yourself and be part of an established brand.
But wherever you are in your journey, you’ll know that joining a franchise is a big decision to take.
In fact, this could be a life-changing moment.
And a decision like that needs careful consideration. It certainly isn’t one that you’ll want to rush into. You’ll want to be well prepared and fully informed before signing up to anything.
Which is why we’ve put together this helpful guide, featuring the key questions to ask when buying a franchise.
It’s not a definitive list; there will be dozens of questions specific to whichever industry you want to join. But it will help you form a clearer understanding of what you should expect from a franchisor, and of yourself. And that’s where we begin. Tackling the most important, and perhaps the most difficult, questions to ask when buying a franchise. The ones you need to ask yourself.
The hardest questions to ask when buying a franchise
There’s one thing you should do before anything else.
Before you think about the type of franchise that appeals to you. Before you get caught up in all of the fantastic freedoms and financial rewards. Before you get in touch with the franchises themselves.
You need to ask yourself: “Am I ready for this?”
Are you ready to give up the security of a monthly salary? Are you ready to invest your life’s savings into a franchise? Are you ready to put your heart and soul into a new venture, and work harder than you’ve ever done before?
If you are, then great. Franchising can bring you the success you desire. Just like it has for thousands of people in the UK.
But is your family ready for it too? Your decision to buy a franchise will affect everyone around you – for better and, on occasions, for worse. Of course, they’ll appreciate the time you have to spend with them and the money you generate to spend. But will they support you in the days when you’re banging your head against the wall, and when you’re cursing all those salaried employees who can forget about work at the weekend?
Because that’s the reality of any business owner’s life. And that’s why the most important questions to ask when buying a franchise should be directed at you and your family.
Think very hard about the reasons you want to become a franchisee too. Think about what you are prepared to sacrifice and what you want to achieve. Franchising might be an easier way of getting into business for yourself. But that doesn’t mean it is easy.
And being honest with yourself isn’t easy either.
It’s why you need to carefully undertake your own self-assessment. You have to really know your strengths and weaknesses. And because the most important questions to ask when buying a franchise are very personal and introspective, you should ask the opinion of those people closest to you as well. Those people you trust to give you an honest answer, but not necessarily the answer you want to hear!
If you want it all your own way, then don’t buy a franchise
A franchise is a system. It is a proven business format that works. Stick to it and you’ll make money, ignore it and you could come a cropper.
So another question to ask when buying a franchise is can you follow a system? Because if you’re a maverick, then franchising won’t be the right business model for you.
Have you always fought against authority? Do you hate being told what to do? Do you think rules are made to be broken?
Then, whatever you do, do not invest in a franchise.
The franchisor has worked hard to establish the rules, probably breaking a few of their own to get there. They know what works and what doesn’t. They’ve made tons of mistakes and wasted lots of money in research and development. And now they’re giving you the opportunity to bypass all of that pain and quickly establish a business of your own.
So take that opportunity, but don’t try to reinvent it.
Franchisors know how their businesses work. Franchisors issue an operations manual because that is how you should operate your business. And you’ll find most failures happen because a franchisee hasn’t followed the manual, or has tried to do things their own way.
Should I be worried about franchisee failures?
Almost every franchised business will have experienced failure of sorts. We’re dealing with real people and real life here. Neither of which is perfect.
If the failure is catastrophic then, yes, you should worry. That could mean the business has never worked, it doesn’t work now, or it works for so few people that your risk far outweighs any potential rewards.
But fortunately, those franchises get found out fast. Especially these days when a few hours spent online will unearth any rogue franchisors.
In the vast majority of cases it’s not the franchisor’s business that’s at fault anyway. It’s the franchisee themselves. Some won’t put in the effort, others don’t follow a system. In rare cases it can be a regional issue, or a change in market conditions. But if a brand has been operating and franchising for a number of years, they’re obviously doing something right.
So, get it out in the open. It’s one of the questions to ask when buying a franchise. But don’t let other people’s failure put you off before you’ve even tried.
Time to get serious as it’s all about the money
Of course, people go into business to make money. But it also costs you money to get started in the first place. So some of the fundamental questions to ask when buying a franchise surround the finance:
- How much can you invest and will you need a bank loan?
- How soon will you see a return on your investment?
- What is the typical income of franchisees in year one, year two, and so on?
- What level of income will you need to cover your overheads?
- Do you have a contingency plan if things don’t take off immediately?
You need to carefully assess your lifestyle and overheads, and work out whether a new venture can support that. Franchises can be lucrative, but very few will deliver a six-figure salary in the first year. So factor in some working capital and set money aside to cover your personal expenses in the early days.
Operational questions to ask when buying a franchise
So you’ve assessed yourself and you’re ready. You know you have your family’s support and you have the funds in place to move forward. Now it’s time to talk to some franchisors and dig deep into the operational aspects of their business.
Of course, there will be nuances to each franchise model you investigate. Every brand has its own systems and processes. But assuming they adhere to the core principles of Business Format Franchising, here are a number of key operational questions to ask when buying a franchise:
- Can you describe the average day of a franchisee?
- Who are my customers and how do I find them?
- How do I get paid?
- How do you get paid (are there fixed or ongoing fees)?
- Who are your competitors?
- What are the market conditions like in your particular sector?
- Is the business seasonal?
- How long have you been trading?
- When did you begin franchising?
- How many franchisees do you have?
- Do you operate any company-owned units?
- What is included in the franchise package?
- What does the training cover and what ongoing support is provided?
Know what you’re signing up to
There are plenty of solicitors you can source through the British Franchise Association who, for a fee, will provide sound professional advice. But here are a few of the legal questions to ask when buying a franchise:
- What is the length of the franchise agreement (typically this will be five years)?
- What restrictions do I have in terms of territory, products, pricing etc?
- Are there targets in the agreement, and what happens if I don’t meet these targets?
- Can you explain the reasons for, and consequences of, a termination?
- What happens at renewal stage?
- How can I go about selling my business?
- Talk to the people on the ground
It is essential you get to speak to existing franchisees at some point in the process. These are the people who are actually doing it. They can give you the ‘warts and all’ perspective.
Good franchisors won’t mind you speaking to their franchisees. They probably won’t want you to speak to all of them, and that’s fine. If they have a large network it could take you all year to get round to them all! But you should be allowed to pick a handful of your own franchisees to meet or speak with, and not just the franchisor’s favourites.
So many of the questions to ask when buying a franchise should be directed at franchisees themselves. Questions like:
- Can you describe your average day?
- Does the franchisor provide the support they promise?
- Does the business work and are you making money?
- Would you do it again, and what would you change next time around?
- What advice do you wish you were given at the outset?
- What impact has the business had on your life – and why?
These are the sort of questions to ask when buying a franchise that will offer you the real-world view. The research you need to undertake that will help determine whether franchising, or any particular franchise, is right for you. In effect, whether you can really see yourself doing it.
Daltonsbusiness.com has a wide array of franchise opportunities to suit all skills and budgets. Now you’re armed with some of the key questions to ask when buying a franchise, click here to review those opportunities now.
By Alex waite