Buy a Franchise

Franchise Validation Questions

One of the most important steps in deciding whether to buy a franchise is to reach out to the existing and former franchisees of the system you are considering. Franchisors tend to recommend you speak with the top performers, so be sure you do your own investigation to get a balanced response. Contact information for all current franchisees plus recent former franchisee is listed in the exhibits to the FDD.

The following are some questions you should ask current and former franchisees:

Individual background

  • What motivated you to open your franchise?
  • What line of work were you in before?
  • When did you leave that career to pursue this business?
  • How much time was there between leaving your career and opening your franchise?
  • Why did you choose this franchise over others?

Initial period

  • Can you describe the initial training that the franchisor provided?
  • Did this adequately prepare you?
  • What do you wish you knew before you began operations?
  • Did the franchisor give you the support you needed during your first year? Is there anything that was particularly helpful?
  • What would you say is the biggest mistake a first-year franchise owner can make?
  • What could cause a franchise to fail?

Support

  • How has the franchisor continued to provide ongoing support?
  • On a scale of 1 to 5, how would you rank the level of ongoing support you receive from the franchisor?
  • Can you give one example where the franchisor was successful in giving support? How could the franchisor improve?
  • After your initial training, does the franchisor offer additional or ongoing training? If so, is this provided on an as-needed basis or is it regularly scheduled?
  • What additional or ongoing training have you received?
  • Has this additional or ongoing training helped? How so?
  • Have you been required to pay for trainings?
  • In your opinion, does the franchisor offer too little training or too much? Do they adjust the amount of training based on the needs of individual franchisees?
  • Does the franchisor host annual conferences? Is so, are these held in-person or virtually?Has anything been lacking in terms of ongoing support from the franchisor?

Marketing

  • How does the franchisor contribute to your marketing efforts?
  • Would you say those marketing efforts are successful?
  • Is the franchisor transparent about how they spend marketing funds?
  • Has the franchisor introduced you to programs for lead generation? Do you use those programs? If so, can you describe the results?
  • What are the costs of lead generation programs? Do you consider them worthwhile?
  • Have you added specific, local programs to generate business? Can you provide an example?
  • Does the franchisor operate online or through social media, or give its franchisees the opportunity to do so? If so, does your franchise do business online or through social media?
  • Are there any competitors in your area? What do you think are the major competitive advantages that set you apart from the competition?

Purchasing power

  • Are you required to purchase from the franchisor or approved suppliers, or do you have the freedom to purchase as you choose?
  • If you are able to use any vendor or supplier, do you consider that good or bad? Why?
  • Does the franchisor use the collective buying power of the entire franchise to obtain discounts on supplies and/or inventory beyond what the individual franchisees could achieve? Can you give an example?
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Franchisor Relationship

  • How is your relationship with the franchisor? Has this changed over time? For better or worse?
  • Have you experienced any conflicts with the franchisor? If so, have they been resolved?
  • Do you feel supported by the franchisor? Do you feel they care about you and your success?
  • Do you feel that the franchisor acts with your best interests in mind? Always, sometimes, or never?
  • Do the franchisor’s actions seem consistently competent?

The Franchised Business

  • How did you decide on a location/territory?
  • How much did you invest to get your business up and running? Have you recouped that investment?
  • Was working capital included in that investment? How much working capital did you budget and for what period of time?
  • What is your current hourly commitment to your business per week? Has that number gone up or down since you started?
  • How would you describe your role in the business? Is this what you expected when you first set out? Can you describe any differences?
  • Have you run into any major surprises since joining the franchise system?

Operating Costs

  • What ongoing fees are you required to pay to the franchisor? Did you plan for these when you first set out?
  • Are the services that you get worth the fees that you are paying?
  • Have you encountered any surprise costs or significant expenses relating to the operation of your business?
  • Have you been required to pay for things you did not expect or were not prepared for? If so, can you give an example?

Money

  • Going in, what were your expectations for annual revenue? Have those expectations been realized?
  • If so, how long did long did it take you to realize those expectations? Have those expectations changed based on internal or external circumstances?
  • How long were you in business before you reached breakeven? Was this what you anticipated?
  • What was your annual net profit (as a number or percentage of sales) last year? If you have been in business for several years, was that fairly consistent with years prior?
  • What factors impact your annual net profit the most?
  • Do you have plans to do things differently in the coming year? If so, what and why?
  • Have you noticed anything specific that separates higher performers from lower performers in your franchise system? If so, how have you determined that?

Time machine

  • All things considered, if you had it to do over, would you decide to get into this business again? Why or why not?