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9 Questions to Ask Before Investing in a Franchise

By Scott Suryan

Investing in a franchise can be an exciting opportunity. It allows you to become a business owner with the support of an established brand and business model. But investing in a franchise is also a commitment of time and resources. So, before making any investment with a franchise company, it's important to do your due diligence and ask the right questions to ensure that you're making an informed decision.

Here are some of the key questions to ask a franchisor before investing.

1. What are the initial costs and ongoing fees?

One of the first things to consider when investing in a franchise is the initial investment and any ongoing fees. Franchises often require an initial investment to purchase the right to use the brand name and business model. In addition to the initial investment, there are usually ongoing fees such as royalties, advertising fees, and other expenses. Be sure to understand the full cost of the franchise before making any investment.

These costs are outlined in the franchise disclosure document (FDD). However, it's a good idea to have a franchise representative discuss the fees with you so you can get a better understanding of what you're getting for your investment.

2. What type of training and support will be provided?

Another important factor to consider is the training and support that the franchisor will provide. You will want to consider the initial training along with ongoing training from the franchisor.

The initial training period is critical for any franchise business because it is where you learn the rules and best practices for maximizing your investment. Ongoing training could include online courses, in-person conferences, hands-on training exercises, and more. It is designed to help support you and help you manage your business over time.

Find out what initial training and ongoing training include: what expenses you will be expected to cover (travel, lodging, materials, etc.), what topics are covered in the training, how many people from your new franchise team can attend, etc.

RELATED CONTENT: Evaluating Franchise Training Programs

3. What is the history and reputation of the franchise?

Before investing in a franchise, it's important to research the history and reputation of the franchise. Look for information about the company's financial performance, any legal issues, and any complaints or negative reviews from other franchisees. You may want to reach out to existing franchisees to learn more about the culture of the franchise team and the company values. This information can help you make an informed decision about whether the franchise is a good fit for you.

4. What do I do when I need support?

When you are in the midst of the franchise sales process, you may speak with different people, including franchise sales representatives. However, the sales team is not likely to be the team that you reach out to when you need support. Find out who your main point of franchise contact will be and ensure that you feel you will be comfortable working closely with them.

Ask the franchisor what the process is like for asking questions and getting assistance. It is nice to have the assurance that you can reach out to a team or specific point of contact and get help when you need it — and you will! You'll want excellent customer service when you do need help.

5. What is the growth potential of the franchise?

Investing in a franchise is ultimately an investment in your future growth and the success of the brand. Before making any investment, assess the growth potential of the industry and of the prospective franchisor.

Look for information about the market demand for the franchise's products or services. You should also closely review Item 19 of the FDD, which discusses earnings and financial performance information. This will give you a good indication of the growth you can expect as part of the franchise system.

6. Do you have a franchisee advisory council?

One of the most valuable resources you will have as a new franchise owner is the expertise of existing franchise owners. These experienced owners will have the best knowledge of the challenges you will face from day one. Your franchise may have a franchisee advisory council, which is a small group of franchise owners that work together to enhance communication, improve the system, and resolve challenges faced at the franchise level. This group shows that your franchisor values the opinions of franchisees. 

However, all is not lost if your franchisor of choice doesn't have a council. Ask if they provide a system for franchisee feedback and if there are experienced franchise owners who can answer your questions and mentor you as you launch your business.

RELATED CONTENT: Benefits of a Franchisee Support Network

7. What is the competition like in the industry?

Another important consideration is the competition in your market and the industry as a whole. Look for information about other businesses in the same industry and geographic area, and assess how the franchise will compete against them. You may want to conduct market research to help you better understand the competitive landscape and make an informed decision about the franchise. You can also talk with the franchisor about their differentiators and how to leverage them to get clients.

8. What are my exit options?

Buying a franchise is an exciting time, and too many new franchise owners can get swept up in the present moment without thinking down the road to the future. One way or another, you will not own your franchise forever, so it is important to get a clear idea of what your exit strategy could be. Every franchise has different rules about selling, passing down, or otherwise getting out your franchise. It's important to understand these options before investing.

9. What is the franchisor's vision for the future?

Finally, it's important to understand the franchisor's vision for the future. Ask about the company's long-term goals and strategies, and assess whether they align with your own goals as a business owner. You may also want to ask about any plans for new product or service offerings, and how the franchisor plans to stay ahead of changing market trends and consumer preferences.

The more you know about a franchise before you make your initial investment, the better prepared you will be for your life as a franchise owner. These questions only scratch the surface of what you can and should ask before buying a franchise. 

If you're interested in owning a Caring Senior Service franchise, we would be more than happy to discuss these questions with you. Reach out to our team to learn more.

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Tags: Franchise Ownership