Top Franchise FAQs
Before you begin your franchise journey, ask yourself these questions and try to answer them as honestly as possible.
By the end of our step-by-step process, you will be able to answer that question for yourself. No, not everyone is destined to be a successful business owner, but if it’s something you have always considered, our process will help you come to the final conclusion.
FEAR. Fear is a natural reaction to a new situation. When the average person moves out of his comfort zone, his brain reacts accordingly. It is the same fear that keeps people in dead-end jobs for years…and the same fear that keeps people in bad relationships. Not everyone can overcome fear. We recommend reading the book Feel The Fear…And Do It Anyway and the article: “The Path Of The 99 Percent” by Joe Mathews.
The evaluation process will require a minimum of 5 hours per week. The process we follow is direct, considerate, effective and even fun. Our approach is consultative to ensure the franchise businesses we mutually evaluate fit your specific criteria; lifestyle, investment levels, skill set, geographic area and more. If you prefer to do your research without the help of a franchise advisor, I suggest you visit Entrepreneur.
Sadly, there are franchise companies that make money selling franchises, doing very little to support their franchisees. I look for companies that will only award a franchise to someone if that person completes the due diligence process and is deemed to have the right skills and attitude to become a franchise owner.
- Be prepared to learn about the business model and concept.
- There is a mutual evaluation process that is expected for both parties. The quality of your questions, your professionalism in scheduling calls and keeping appointments, and your ability to complete tasks is very important.
- Be thoughtful and engaged as you talk with franchise owners.
- You will be invited to a meeting with their corporate leaders, typically at their headquarters so that a final determination can be made – by you and by them!
Have questions for our expert? Here are some of the first questions people will ask Liz about the franchising process.
In short, we save you time and money. We provide you a wealth of general and specific information about the franchise industry. We provide in-depth research and knowledge to help you find the best opportunity in the right market according to your criteria.
We will start with an initial interview to gain insight into your previous experience, goals, strengths, weaknesses, investment range, target market and more. We will work to select ideal franchises for you and assist you in evaluating the opportunity and remain by your side throughout the remainder of the process.
Buying a franchise makes entry into business ownership much easier. Following a proven business plan using the methodologies, systems, and a recognized trademark dramatically speeds up the process while reducing the risk involved.
The answer depends on you and how much time and attention you are willing to commit to your evaluation. I advise people that if they are serious about getting to a decision, they should be willing to commit between 5 and 10 hours per week – representing a combination of phone communications and research. Most people complete their investigation in 4 to 6 weeks. A person who is really focused can be done in 4 weeks, while some people can take as long as 90 days.
I do not charge a fee for my services. However, the franchise companies do pay us for finding the best match in a candidate franchise owner. Franchises are awarded to the best candidates who fit the skills and abilities necessary to be successful in that business.
- More flexibility in their day. Franchisees look for greater input in their day-to-day activities.
- More control. Franchisees want the authority and responsibility to make decisions which impact their business careers. They look to create a more performance-based and less political-based work life.
- More work-life balance. Many franchisees discovered that their past careers were consuming them, jeopardizing their closest personal relationships. Many start franchises to spend more time with family, which may also include working with family members.
- Greater Personal Challenge. Many franchisees had either reached the pinnacle of their professional careers or were competent to the point of no longer being challenged. They were in some version of a career rut and desperately needed a change.
- Giving back to the community or making a difference in the lives of others. Many franchisees have achieved financial stability or success in their past careers. They felt it was time to give something back.
- Financial Gain. Many franchisees have a track record of success, creating wealth for shareholders or owners of other companies. It became time to create more equity and greater wealth for themselves and their families.
Royalties are the magic that makes the formula work. So what would it cost you to hire a management, advertising, and customer support team? The answer is usually more than the average owner would ever spend! How much would you put back into the business? The cost usually outweighs the royalties. The wonder of royalties is that instead of the individual owner footing the bill to run his or her business, the expense is shared with all of the franchisees within the organization.
No problem. Business ownership is not for everyone. Give yourself credit for exploring new career options!
Ask the Franchisors
Here are some important questions to ask when you reach out to franchise company representatives.
Franchising is regulated by the Federal Trade Commission (FTC) and the Attorney General’s office in some states. They are not permitted to make financial earnings claims. However, you can ask if they have an Item 19 in their FDD, Franchise Disclosure Document.
Whether it’s an emerging brand with a hot new concept or an older brand that’s become a household name, the market, and consumer’s needs are always changing. The new programs should be well-tested and consistent with the franchise’s core competency. What R & D resources are in place to deliver new ideas, services, and products? Does the franchisor seek new ideas from existing franchise operators in the field? The Egg McMuffin was conceived by a franchisee.
Most franchise agreements stay in effect for 5, 10 or 15 years. This means that the franchisor can’t change the terms you’ve agreed to in the franchise agreement…you’re grandfathered into the current royalty, ad fund, and territory size. This is protection for you! So when you’re ready to exit, Item 17 comes into play. Be sure to read this over and have a discussion about this.
Many franchises will answer yes. However, emerging brands typically have the provision written into the franchise agreement but may not implement the fund until they have enough franchisees to merit it.
This is a hidden fact but vital if you are to get adequate support. If the brand is rapidly expanding and awarding many new franchises, do they have an operational infrastructure in place to train and support them? Growth is needed, but it must be balanced with a strong support organization.
Ask the Franchise Owners
Not sure the right questions to ask a franchisee? This is a great place to start.
- ROCK STARS/TOP PERFORMERS who exceed even the expectations of the franchisor. Ask them what they do that’s different from everyone else.
- LIFESTYLE-DRIVEN franchise operators who get out the business what they put into it. When they reach their goals, they plateau. A good question to ask owners; are their current results matching their pre-launch expectations.
- UNDERACHIEVERS who may have experienced a major health issue, their partner or spouse may have left the business (resulting in an imbalanced management team) or they simply don’t follow the system (preferring instead to shift the blame to the franchisor). Usually, you’ll do more listening than asking here. Take good notes and remember to avoid this type of behavior when you run your franchise.
Be Persistent. You may have to call 10 people in order to speak with 7 of them. Remember, they’re busy running a business. Be Polite. Asking for an appointment if you’ve caught them at a bad time is a great way to begin the conversation. Limit your call to 30 minutes, unless they’re willing to give you more. Be Productive. If your first objective is to gather basic financial information, follow the script for building your mini proforma. If you bond with the person, ask for a copy of their business spreadsheet.
- What type of work did you do before you got into your own business?
- Why did you leave that to go into your own business?
- When did you open your business?
- Why did you choose this franchise?
Yes, it’s a sensitive question. But here’s one effective way to ask: “Sam, you’ve been very helpful in spending time with me. May I ask you for one last piece of vital information? How much money did you take out of the business last year, your net-profit dollars or percentage?” HINT: Listen carefully. For example, Sam tells you he had a net-profit percentage of 22%. $400,000 of gross sales divided by .22 = $88,000 in profits.
- Did your initial training prepare you for opening your business?
- During your first year in business, did the franchise company support your business activities and results to the level of your expectations or needs? Can you give an example?
- What do you think is the biggest mistake that a first-year franchise owner can make?
- What would cause a franchisee to fail?
- Has the franchise company supported your business activities and results to the level of your expectations or needs? Can you give an example?
- After initial training, what additional training exists? Is it regularly scheduled? At random? As needed? Or a combination? What additional training have you undergone? What differences has that made?
- Is there enough/too much training? Is the franchise company flexible in giving more training to franchise owners who need/want it?
- Does the franchise company host franchisee annual meetings or teleconference calls?
- This can often be a great source of information, training, and networking with other franchisees.
- How does the franchisor contribute to your marketing efforts? What are the results of those marketing efforts?
- What programs for lead generation has the franchise company introduced you to? Do you use those tactics? What are the results and costs of those tactics? Do you consider them worthwhile? What have you added locally to generate business?
- How did you determine the location/territory you have?
- How much investment did it take you to get your business up and running? Did that include some working capital? How much working capital did you budget? How long a period was that intended for?
- Currently, what is your hourly commitment to your business per week? Has the amount of time you work changed since the first few months you were open?
- Is your role in the business what you wanted/expected it to be? If not, how is it different?
If you only have time for one question, this is it!