10 Questions to Ask a Franchisor Before You Invest
As a potential franchise investor, you’re not just buying into a business; you’re adopting a brand and its operational blueprint. Knowing the right questions to ask when buying a franchise will help you decide which opportunity is the best option. Explore our list of questions and what to listen for in the answers.
Understanding the Business Model
When formulating your questions to ask a franchisor, receiving a solid understanding of the brand’s business model should be a top priority.
- What is the history and growth trajectory of the franchise? Learn about the franchise’s journey, its growth over the years, and future expansion plans. This gives you insight into the brand’s stability and growth potential.
- Can you provide detailed financial performance representations? Request concrete financial data, including average revenues, costs, and profits of existing units. Franchisors are not legally obligated to give this information, but it can be helpful when it is shared. Keep in mind that these representations do not in any way confirm your earning potential with the brand. These figures give you an idea as to the overall financial health of the brand.
Listen for: Openness and willingness to provide detailed, verifiable data. Be wary of vague or overly optimistic financial representations without concrete evidence.
Support and Training
Two of the main benefits of deciding to franchise, as opposed to starting an independent business, are training and ongoing support. So, you’ll want to know what the franchisor provides.
- What type of training and ongoing support do you offer? Comprehensive training and support are the backbones of a successful franchise. Understand the extent of the training, including its duration, scope, and whether it’s offered on-site or remotely.
- How do you assist with site selection and lease negotiations? Find out if the franchisor offers guidance on choosing the right location and if they assist with lease negotiations, as these are critical factors in your business’s success.
Listen for: Specifics on the training modules, support system, and real examples of how they’ve assisted other franchisees.
Financial Commitments and Expectations
Equally as important as understanding the business model, you must be completely aware of any and all costs associated with starting the franchise. See the following financial questions to ask a franchisor:
- What are the initial and ongoing financial commitments? Clarify all costs involved, including initial franchise fees, royalties, marketing fees, and any other recurring expenses. Restaurant franchise costs should be clearly laid out in the brand’s Franchise Disclosure Document (FDD).
- What are my territory rights? Understand if you’re granted exclusive rights to a territory and the policies if another franchisee wants to open a location nearby.
Listen for: Detailed breakdowns of costs and clear explanations of how these fees are utilized to support franchisees. Also pay attention to whether or not your territory is exclusive to you.
Franchisee-Franchisor Relationship
The relationship a franchisor has with their franchisees is incredibly telling. Be sure to inquire about the nature of the partnership.
- Can I speak with current franchisees? Talking to existing franchisees can provide invaluable insights into their experiences with the franchisor.
- How do you handle conflicts or disagreements with franchisees? Understanding the conflict resolution process is crucial for foreseeing how potential disputes might be handled.
Listen for: Encouragement to engage with other franchisees and a structured, fair approach to resolving conflicts.
Market and Competition
Any reputable franchise brand should be able to clearly dictate why they stand out in their industry. Be sure to get clear answers to the following questions:
- How do you stay competitive in the market? Inquire about the franchisor’s strategies for innovation, marketing, and staying relevant against competitors.
- What market research do you provide to help me succeed? Find out if the franchisor offers market analysis and how they support you in understanding your local market dynamics.
Listen for: Concrete strategies for innovation and adaptation, and a commitment to ongoing market research.
Get to Know Teriyaki Madness
Investing in a franchise is a significant decision that requires due diligence and a deep understanding of what you’re getting into. By asking these insightful questions, you’re not just seeking answers but also gauging the franchisor’s directness, supportiveness, and alignment with your business goals.
Named by Franchise Times as a Best Franchise to Buy, Teriyaki Madness offers a special franchise opportunity in the bustling fast casual sector, focusing on flavorful, healthy Seattle-style teriyaki rice and noodle bowls made to order. Franchisees benefit from comprehensive training, ongoing support, and marketing tactics that help them build their business with a proven and popular brand.
The Madness is spreading fast, with room for ambitious and qualified entrepreneurs to join them. To learn more about franchising with Teriyaki Madness, download the franchise report.
