Questions to Ask Franchisors Before Investing in a Franchise

When considering investing in a franchise, one needs to do extensive research and have a prepared list of questions ready to ask each company. It is best to go into the prospecting process prepared and to have a clear outline of what you want to learn from each franchisor.

Franchise consultants are responsible for connecting entrepreneurs with businesses who are looking to sign franchising agreements. They work in a broker position, making sure that the franchisees are a good fit for the company and vice-versa. People who dream of owning a business come to them for help identifying their values and what questions they need to be asking to ensure they find a brand aligned with them. 

Several franchising experts shared what they advise their clients to ask franchisors when discussing signing an agreement with a brand:

Regarding Finances 

Tami Burdick, franchise business consultant and CEO of TD Business Consulting & Training, said the conversation should first cover the financial aspects of the business to determine if it’s in your budget. 

“Ask ‘What is the total investment? What are the royalties? What operating capital is typically needed, and then more specifically, what percentage is typically spent on each area?’” Burdick said.

David Busker, founder and president at FranchiseVision, recommends being thorough when talking about costs and asking for exact line item amounts. He says when it comes to the total investment, ask about the specific numbers for franchise fee, furniture, fixtures and equipment, as well as any deposits, travel expenses, advertising and staff costs. Regarding continuous financial costs, ask about royalties, if products must be purchased through the franchisor, and what ongoing advertising mandates are.

Internal Support 

Both Burdick and Busker also advise looking into what the support system looks like at a prospective company one wants to invest in. They say to ask about how often the executives will be coming into the stores and working hands-on with the franchisee and their teams, how involved they will be in training, and if there is a Franchise Advisory Council (FAC).

Understanding the initial support the brand will give before and during opening is critical, Busker said. 

He advises asking the following: “How well do the training programs and support prepare franchisees for opening and running their business? How easy does the franchisor make the process of getting the first unit open and operating? Is there assistance in site selection, lease negotiation, construction and design assistance, financing assistance, permits or any other factors unique to getting this business up and operating?”

Performance & Growth 

Burdick said prospective franchisees need to inquire about past performance and learn about both the company’s successes and failures.

“How many current franchise locations are there and how many franchises are no longer part of the system, or failed?”

John Francis, franchise consultant and founder of Next Level Franchise, said to ask about their plans for the future. 

“Ask ‘What are your plans for scaling the brand? Is there anything in the business model they see changing in the near term?’ This might give insight as to what they think they can do as franchisor with the brand in the U.S. and internationally. Ask for numbers, years, a range of locations and geographics, etc. The more you can see how far ahead they're thinking, the better you can gauge if it's a good fit,” Francis said.

Franchisee Responsibilities

Prospective owners also need to make sure they explicitly understand what their duties will be as a franchisee. Burdick said to ask about any conventions that they are required to attend, if they would act as an owner or an operator (or both), if a brick-and-mortar store and/or company vehicles are mandatory, and what the territory restrictions are.

“One thing I always encourage any potential franchisee to do is randomly contact several current franchisees to ask their overall opinion of their experience,” she said. 

“As a franchisee there are many expectations placed on you regarding payments, operations and other obligations per the franchise agreement,” Busker added. “It’s important to have a discussion with the franchisor to gain a clear understanding surrounding what is required of you as a unit operator. In addition, it’s important to ask about the greatest challenges most franchisees face to help you decide whether the franchise opportunity will be a good fit for you.”