10 Questions to Ask your Franchise Sales Team

By Ben Heinemann So you’ve decided to buy into a franchise and start your own business. Congratulations! But before you sign on the dotted line there are questions every potential franchisee should ask the franchise sales team. We picked the brains of Steve Beagelman, founder and CEO of SMB Franchise Advisors*, and Eric Little, SVP of franchise development for Right At Home, to give us some insight on key questions you should be asking: What is the culture of your brand? – It’s essential to understand if the type of business you are buying is very hands on or if you can be an absentee owner running it on the side. “These are two very different types of owners,” says Beagelman. “There are some franchisees who are right out of corporate America and want to be as involved as possible, but then there are others that want to be involved in something but aren’t necessarily looking for a full-time job.” How strong is the company financially? – Little points out that knowing the current financial state of the business is important. “Know what effect the Great Recession in 2008 had on franchisees’ performance.” Beagelman also encourages potential franchisees to look at the company’s Franchise Disclosure Document to gauge the strength of the franchise system. How many stores/locations have failed? – Without sounding too negative, it’s important to understand how and why some locations of a franchise have not been successful with the brand. “Many people won’t answer this question, but if you believe you have the same vision for the company as the brand does, franchisors will tell you it will be a successful business,” says Beagelman. If the answer to that question happens to be something like “they just didn’t follow our system,” Little suggests asking a second question: “What part of the system didn’t they follow?” Where exactly will my territory be? – Many times, a potential franchisee will be told they are buying a location in, say, Chicago. While visions of the Magnificent Mile may be dancing around the franchisees’ head, they may soon come to find out “Chicago” actually means Springfield, IL. “Don’t waste your time by looking into a brand that can’t offer you the location you actually want,” says Beagelman. Will this business be relevant in 5 years? In 10 years? – Starting a business in something that might just be a passing fad is not going to make you a successful business owner. Little says knowing the potential longevity of a brand or concept is a key to success. “Ask if there’s a long term demand for the product or service that you will be offering.” How much money can I make? – While franchisors may not be able to give you a specific answer on this question, Beagelman says you should ask to see Item 19 in the Franchise Disclosure Document for a better idea of the amount of money you can potentially make. How many franchisees attend your annual convention? – Little points out this is a good way to gauge the franchisees’ involvement with the company and the brand. Can I speak with current franchisees? – Beagelman says that a lot of times, potential franchisees won’t be able to speak with others in the business until they are further along in the franchising process. “Franchisors want to make sure you’re serious about this,” he says. If this is the case, Little suggests asking the franchisor how their happiest franchisee would speak about the company to their friends. “Also ask them what their least satisfied franchisee would say.” What’s the exit strategy? – After you build the business, it’s important to know the potential value to a prospective buyer. “Ask them if they have had any franchisees who sold their businesses and what the sales prices were,” says Little. Ask for the “elevator pitch.” –  Little says if the franchise sales team is good, they should be able to answer many of your questions before you have to ask them, being able to share the top 5 or 10 things you should know about their business. “If you’re really serious about opening your own business, try to find reasons to move forward,” says Little. “Every business has its warts – staffing issues, employees calling in sick, customer service – they all have them and they’re different for everyone. Get the whole picture before making up your mind.” Steve Beagelman is a franchise industry veteran of more than 25 years who held positions ranging from entrepreneur to senior level executive, giving him a unique insight and perspective in growing, operating, and building brands. In 2009, Steve established SMB Franchise Advisors, a consulting company specializing in advising franchise start-ups and existing franchise concepts of ways to drive business growth. Eric Little joined Right at Home* in September 2008 as Senior Vice President of Franchise Development. He is responsible for leading Right at Home's national growth efforts to find new, well-qualified franchisees that want to make a difference in their community.