Top questions to ask a franchisor
The process of becoming a franchisee can often be a long and challenging one, with the most well-known brands being particularly selective. Franchisees can expect to be thoroughly vetted during the recruitment process, as franchisors want to ensure they are taking on people who are truly capable of, and passionate about, running a successful business that will uphold the brand’s reputation.
However, the questioning during the application and recruitment process does not have to be – and indeed, should not be – one way. The prospective franchisee should be doing everything in their power to make sure the franchise is right for them, and a natural part of this is asking the franchisor for as much information as possible. Not only will this allow the applicant to make an informed decision on becoming a franchisee, but it will help to display their eagerness and preparation to the franchisor.
What is the application process?
Researching the process of applying to open a franchise outlet with a company is one of the first steps any prospective franchisee must take. While the initial step for almost all franchisee applications is an online application form, the next steps will be much more diverse. The length of the application process largely depends on the size and reputation of the company. For some small companies, the process will be relatively straightforward, while McDonalds requires the applicant to undergo three interviews, a 5-day restaurant placement with a Business Manager and a meeting with several current franchisees before they can be considered. Having a thorough understanding of what will be expected during these early stages is important to potential franchisees so they know how much time they will have to devote to the pursuit. If you are considering a number of franchises and are eager to begin as soon as possible, it may also be worth asking what percentage of applicants are accepted and rejected.
What is the training process?
The training provided to new franchise owners is perhaps one of the most attractive aspects of franchising and plays a crucial role in ensuring their business’s success. Therefore, it is important for the applicant to understand from the outset how much training will be provided. As with the application process, the level of training varies considerably between companies. McDonalds require all applicants to undertake a nine-month unpaid training programme, while the training course for Subway franchisees lasts for two weeks. In addition to understanding how much training you will receive before opening your store, it is important to ask the franchisor about the level of ongoing training that will be provided to ensure franchisees are kept up-to-date with new developments in the industry. It is also worthwhile to ask the franchisor about any additional support that is offered, such as an operations manual, an annual conference or a franchisee support network.
How successful is the franchise?
Everyone who enters the world of franchising does so primarily to make a profit. As such, it is important for prospective franchisees to ask the franchisor for detailed information on the financial performance of the company. An important aspect of this is asking about the number of franchisees that are currently in the network, and more significantly, how many of these franchisees have succeeded in meeting the franchise’s revenue projections. To verify the franchisor’s response to these questions, it is a good idea to speak to some of the business’s current franchisees, and the franchisor should be willing to provide a list of franchisee’s names to facilitate this.
How much does it cost?
It is crucial that you fully understand all the costs involved with buying a franchise. The largest fee associated with becoming a franchisee is the franchise fee – this can range from anywhere between a few hundred to hundreds of thousands of pounds depending on the type of franchise and the industry. Although this fee should cover many of the costs of getting your business up and running, there will be many other expenses that you should discuss with the franchisor, such as ongoing royalty fees and advertising and marketing fees. It is also important to think of costs that may arise in the future, such as franchise renewal fees and resale fees, and the franchisor should disclose these in full before a franchise agreement is signed.
What does the franchise package include?
The initial franchise fee usually provides a ‘package’ to franchisees which prepares them for the operation of their business. A typical package includes the rights to the brand name and logo, training, equipment, furnishing, signs etc. As a potential franchisee, you should make sure you are fully aware of what will be included in this package, as it will help you to decide whether the franchise is worth the investment and can indicate how supportive the franchisor will be throughout the course of your business relationship.
What is the background of the franchisor?
Although most franchisees will have carried out extensive research on the background of the company they hope to become a part of, there may be some information which can only be acquired by directly asking the franchisor. For instance, it is helpful to gain as much information as possible about the directors of the company, including their previous roles and reasons for going into franchising, as this will allow you to determine the level of experience and knowledge of the people you will be working with. It is also important to ask the franchisor about the way the franchise was set up. If it was established with the help of Bfa-accredited lawyers and consultants, you can feel confident that the terms of the franchise agreement will be fair and that you are entering into a legitimate enterprise.
What support will be given if I decide to move on?
Many people buy a franchise with the full intention of selling it in the future once it has become valuable enough to make this worthwhile. Even if you have no definite plans of selling your business, you must think ahead and plan what you will do if you decide to move on for any reason. Good franchisors will understand this and will support franchisees who wish to sell their business. However, some franchisors may wish to avoid resales of existing franchise units and focus on opening new units due to the larger fee they can charge franchisees for doing so. Therefore, it is important that you ask the franchisor how much support they give to franchisees who wish to sell their business, e.g. whether they help to advertise resales. If the franchisor says that they support exiting franchisees, ask them if you can speak to past franchisees who have sold their business with the company as this will allow you to verify the franchisor’s claims and find out how much your business may eventually be worth.
