Becoming a successful franchisee isn’t as easy as investing money into a franchise and seeing a profit. If you want to see stable earnings down the line, you need to be diligent when choosing between multiple franchise opportunities. It isn’t always easy to distinguish a good opportunity from a bad one. Some opportunities may not be necessarily bad but simply aren’t right for you.
The best way to feel confident about the franchise you are investing in is to find out as much information as possible upfront from potential franchisors. If you aren’t sure where to begin with your line of questioning, here are just some of the questions that you should consider asking before making any big decisions.
What Is My Earning Potential?
Prospective income is, understandably, a top priority for many new entrepreneurs. You don’t want to dedicate yourself to a franchise that offers little room for growth. Be transparent with your earning expectations when speaking with franchisors, and understand that you may not always be able to receive what you want. While a franchisor won’t be able to give you a concrete estimate as to what you will earn, they should offer reassurance that you will be able to reach your goals down the line.
How Long Have You Been Franchising?
Before committing to putting your time, energy, and raised funds towards hot franchise opportunities, you have to feel comfortable with the amount of experience a particular franchisor has. Most franchisors have seen a level of success in the past, leading them to franchise their businesses in the first place, but some have their franchise model more thoroughly outlined than others.
A franchisor should have demonstrated that they have the knowledge and skills to provide you with the amount of support you want and need. Speaking to other franchisees from a franchise will provide further insight.
Can You Tell Me More About Your Products/Services?
Though you will eventually become extremely familiar with the products or services that you provide, there is a lot you won’t know at the start of your franchising journey. This is the time to learn more. You can find out about the origins of a product, what makes a franchise’s services unique, and more. These product questions may also be helpful in choosing a franchise:
- Do you intend to introduce any new products to your lineup?
- Are there any limitations in place regarding the sale or distribution of your product?
- Does your franchise have a warranty or guarantee program for customers?
- Is there a minimum amount of product that must be purchased?
What Failures Have You Seen in the Past?
No franchisor got to where they are today without making a few business mistakes. As the saying goes, you can’t make an omelet without cracking a few eggs. Learning about how a franchisor dealt with the mistakes of their past will give you an idea of their management style and what you can expect in the future, should things not go to plan.
If a franchisor is not willing to divulge any information about business failures, you should take that as a sign to look elsewhere. Reluctance to speak about previous mistakes should be considered a red flag, as they likely have not learned from said mistakes.
Can You Explain Your Contract Termination Clauses?
Though nobody enters into a franchise agreement contract anticipating early termination, it is essential that you prepare for all possible scenarios. Should you experience financial hardship or need to move suddenly, you want to know the required steps for contract termination. A franchisor should be forthcoming about their contract clauses.
That being said, you should always do your due diligence when reading the contract, even if a franchisor has discussed the clauses with you already. Reading the fine print, and potentially hiring a business lawyer to explain terminology, is likely to save you time and stress later on.
What Does Your Training Look Like?
The amount of training offered by a franchisor shouldn’t come as a surprise after you invest. A franchisor should make clear how much support they will give you. This is especially important to consider if you are entering a franchise that you haven’t worked in before, as you can anticipate a learning curve from the get-go. If you've exclusively worked in the restaurant industry, you'll have a harder time grasping the ins and outs of an auto insurance franchise than you would while taking advantage of restaurant franchise opportunities.
When interviewing a franchisor, be sure to ask:
- What does the initial training involve?
- Are there structures in place to offer me and my employees support after the initial training?
- What level of assistance will you provide in terms of financing and obtaining equipment?
- How available will you be, should I have questions about the training?
What Should I Expect When It Comes to Marketing?
The marketing guidance that franchisors give will vary greatly. Certain businesses have strict procedures and marketing materials that they will communicate to you. Some leave a bit of wiggle room for you to be more creative. One option is not necessarily better than the other — it really depends on your individual desires.
If you have a background in marketing, advertising, or creative projects, then you might want to take the reigns and craft your own methods. Some established businesses, however, don’t want to risk the consequences that come with less-than-optimal decision-making on behalf of their franchisees. In addition to creative marketing strategies, you might want to inquire about how a franchise finds its sales leads, whether or not they provide financial support when it comes time for your grand opening, and more.
Can I Get in Contact With Other Franchisees?
As valuable as the information you get from a franchisor is, it doesn’t compare to what you will learn from other franchisees. They will be able to detail their experiences — positive and negative — with you so that you know what to anticipate at different stages of your journey as a franchisee. It will also let you know more about the company’s culture and if it aligns in actuality with what a franchisor tells you about it.
If a potential franchisor seems hesitant to get you in touch with other franchisees, you should take them out of the running. This indicates that they don’t believe you would move forward with your investment if you heard true testimony about how they operate their business.
Questions to Prepare for the Franchisor to Ask You
When getting ready for your interview with a franchisor, you should know that they might ask you questions, as well. Just as you want to feel comfortable with your investment, they want to know that they can trust you to run a sector of their business. Preparing answers in advance will make you seem like an excellent franchisee candidate. A few questions that they could ask you include:
- How do you expect to finance your business?
- What does your business background look like?
- Why do you think you’re a good fit for our franchise?
- Where do you see yourself in five years/what are your long-term goals?
According to Statista, in 2020, there were an estimated 753,770 franchise establishments in the United States. With so many options out there, it can be tough to know where to begin. Once you’ve used Franchise Reovery’s services to narrow down your list of franchise opportunities, use these questions to guide you in your choice. In the end, be sure to ask yourself what your gut is telling you.
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