Questions to Ask Before You Buy a Franchise

Questions to Ask Before You Buy a Franchise

With the profound effect on the economy of the COVID pandemic, it is more significant than ever to do your own analysis before investing in a franchise. It’s always a good idea to read independent feedback from existing franchise owners as part of your due diligence. A good place to start is to research franchisee satisfaction surveys, but you may also want to talk to as many established franchise owners as possible, as well as the franchisor, to vet a brand before purchasing.

Also Read: How to Determine Which Franchise Opportunity is Best for You

You probably already have several questions of your own, but as a useful starting point, we suggest these:

Questions about COVID Effects

  1. How was your organization affected by COVID? Are you behind 2019, up, flat?
  2. How has your interaction with the franchisor / corporate team since COVID changed?
  3. What adjustments are going to be part of the way you do business going forward during COVID?
  4. How did you update your COVID-based 2020/2021 goals?
  5. What are some ways in which the corporate team helped you handle the chaos and open up the backup during quarantine?
  6. What are the safety precautions in your room for visitors and employees?
  7. During this spring/summer, how did fellow franchisees cooperate or support each other?
  8. How would you rate the brand’s technology/innovation (online ordering, distribution, items)?

Questions to Ask Before You Buy a Franchise During Pandemic

  • Did your business opening go according to plan?
  • How good and beneficial has your initial training been and is the continuing training?
  • How much help are you provided on a day-to-day basis by the franchisor?
  • Will the franchisor help you fix them if you run into issues?
  • Will the franchisor periodically visit you?
  • How helpful are the handbooks on operations and training?
  • Do they arrive on time if the franchisor offers goods, and is their quality consistent?
  • How long has it even taken to break?
  • When were you making a profit?
  • What was your gross first-year revenue? Now, what is it?
  • Was turnover and profitability in line with what you were told by the franchisor that it would be?
  • Does the franchisor promote the contact of franchisees with each other?
  • How helpful are the other franchisees?
  • What do you wish you knew that you weren’t going into business?
  • Is there something that you’d do differently?
  • Ask the franchisor the following questions to help decide whether the franchise you are considering is a successful investment:
  • How long have franchisees been franchising for?
  • What are the management team’s knowledge and experience?
  • Is this undertaking financially sound? Ask if they will have, and make your accountant look at, three years of audited accounting and current management accounts.
  • How many current owners of a franchise are there? How many owners of franchises have failed? Why were they failing?
  • What evidence is there to prove the marketplace’s viability? Is there a demand for goods or services on a long-term basis?
  • Who are the major rivals, and in terms of price, cost, distribution, and operation, how do they compare to the franchise?
  • How much and what does the start-up investment include?
  • How much, on an ongoing basis, would you have to pay the franchisor?
  • For your business, what are the financial projections?
  • Is there any established territory? How is the franchisor preventing its franchisees from cannibalizing each other’s business?
  • How long is the length of the franchise contract? Can it be renewed?
  • How long does it take, after the agreement is signed, to be up and running?

It can be incredibly exciting and also considerably overwhelming to buy a franchise or start some new venture. Nevertheless, you will be able to make a decision based on evidence and data by asking the right questions and doing rigorous due diligence so that you can set out with confidence!

Related Articles :

Why Now is the Right Time to Consider Franchising

Why Now is the Right Time to Consider Franchising

We have seen regular updates over the last few months on the number of cases identified and deaths from COVID-19. We also learn about the effect of the pandemic on the business sector of the nation, as more than 36 million people have filed unemployment claims since mid-March, representing 22.4 percent of the labor force of the country.

It’s a terrifying and unpredictable moment. Many individuals are only focused on survival, remaining safe, and either retaining their work or replacing the one they lost quickly. The ‘shelter in place’ fear that we live with every day generates the feeling that now is not the time to make a career change or consider starting a company, not only is this the time to conquer your fear, but this dislocation that we encounter offers a unique opportunity to regain control of your future.

Things to consider when thinking about franchising ownership in 2020

Shortened/Reduced rental prices

A year ago, any business owner will tell you that it’s extremely difficult to find a great spot at an reasonable price. That is changing today. Prime locations become available as companies close.

Econ 101 tells us that prices are dropping as the supply of prime locations goes up and the demand for those locations goes down. A new business owner now has a much greater opportunity to obtain a prime position at an affordable cost.

Competition Reduced

Everybody jumps into business in a strong economy. There is a lot of demand, but a lot of competition is also available. This also results in higher advertisement rates and fierce competition for rates.

Why Now is the Right Time to Consider Franchising

Weaker players without stable operating systems and financial controls are closing shop in today’s world. Those with stronger systems can thrive and be able to grow market share in a better way. We’ve seen this happen in 2009, and we can see the same thing happening again now.

Also Read : The Pros of Buying a Franchise: Is it Right for You?

Employee Eagerness

Employees are one of the main obstacles of company ownership. It is difficult to find good workers that you can count on. Good employees are scarce in a peak economy, and just to get them to enter your company, you must have economic incentives.

Now that is not the case. There are a number of high-quality individuals seeking work today. At a reduced cost, you can secure higher-quality jobs. The pendulum is spinning in the direction of the proprietor of the company.

Real Job Security Protection

Once again, we face the sobering fact that it is not possible to take ‘job protection’ for granted. People who have lost their jobs, have been furloughed, or are curious about the next wave of possible downsizing of businesses are rightfully concerned.

But for a moment, let’s speak frankly. You will never have job protection as long as you are an employee. Promises are made, but workers can be removed at any moment when times are tight. The only way to experience job protection is by company ownership. You will have to believe in yourself and eventually, you will be responsible for the outcomes. The only way to build absolute job security, however, is company ownership.

Also Read: Things to Know Before Applying For Franchise Opportunities

Incentives by Franchisor

Some franchising providers have been providing temporary promotions over the past few months. Examples include waiving six-month royalty, franchising fee concessions, paying for training expenses, or flexibility with respect to opening dates. COVID-19 is the only explanation of why these benefits are being offered. The market environment is evolving and franchisors are adjusting and adapting. For the franchisee, the outcome is a greater incentive.

Dislocations like those we see today are always terrifying. Humans have always been terrified by the unknown; change is not always evil, however. Change offers opportunities occasionally.

This year’s first half gave us all the time to focus on what is significant. This could be a good opportunity to take greater control of your professional career by considering franchising ownership if you are unsure of what your future holds.

Related Articles: