If you want to run your own business, but find the start-up phase daunting enough to put you off from taking this big step, a franchise option may be the right one for you. As a franchise owner, you’ll be using a proven model instead of experimenting with a new one. This is a safer bet for individuals who are not inclined to take a big risk but want to be their own boss. As a part of your research to make a decision, you’ll first want to check out the different franchise models that exist to find out the one that’s best suited to you. Once you’re convinced that franchising is the route you want to take, we want you to make sure these five key factors are definitely a part of your due diligence process:
1. Investment Versus Return on Investment (ROI)
Asking how much investment is required may seem like one of the most obvious franchise interview questions. However, that number is relatively meaningless if you are not able to make an ROI estimate. If the average ROI projections are unknown or the franchisor is unable to offer information on any predictable returns, this increases the risk attached to your investment. Finding out the average investment and projecting an average ROI through the Item 19 in your disclosure document will help manage the risk and tell you if the franchise opportunity is worthwhile.
2. How Long Has the Franchise Been in Operation?
In a world full of exciting and interesting startups, it’s easy to put all your eggs in the basket of a franchise or company that won’t end up going anywhere. This is why asking the right type of questions is so important for a prospective franchise buyer. One of the most important questions to ask a franchisor is how long the company has been in business. An older, more established franchise might have a better business track record and more stable financial history and strength. This is also the time during the interview when you can discuss their failure rate, turnover rate, and more.
3. Do They Have Plans for Growth and Expansion?
Business is never stagnant. It’s always moving forward to create more profits and opportunities for investors and business owners. This is especially true with a franchise. This is an important question to ask a franchisor before buying a franchise because it will give you an insight into your future. If the franchisor’s growth and development does not line up with your personal goals, you might want to consider looking elsewhere.
4. What Type of Support Can They Offer?
There are numerous questions under this umbrella that should always be included in what to know before buying a franchise. Essentially, the support you receive from your franchisor will directly impact your success and profitability. Some example questions to get a better idea of their overall support include:
- Is there a starter kit?
- Will you help me find a location?
- Will you help me negotiate the lease?
- How are disputes handled?
- Is there a training program?
All of these questions will help you better understand the values and culture of the company, helping you to decide if it is a good fit.
5. What are the Criteria to Be Selected For a Franchise?
Although you may have done your research and understand your requirements to start a franchise, it’s always helpful to understand what the franchisor deems as an appropriate candidate to operate a franchise. If they are approving everyone who applies to buy a franchise, you can reason that they are not discerning enough.
Knowing the criteria will give you an idea of their success and the type of people they wish to have associated with their brand. A franchise with high expectations and requirements from its buyers will ultimately provide the better business opportunities since you are working with an elite group.
By asking these five questions, you will be performing your due diligence to find out everything you can before investing your hard-earned money into a franchise. As the very first step though, take this self-assesment test to figure out if you have it in you to be a self-starter!