Because his money is involved, a prospective franchisee must be extremely careful in scrutinizing franchise offers. He should have a ready set of questions that the franchisor must be able to answer convincingly and show basis for his replies. Some of the important questions to ask a franchisor are:
How long has the franchisor been in the business? How many franchises are there at present? How many have failed? The answers to these questions will give the franchisee an overview of the business and its present franchise network.
Specifically, what will the franchisee get from paying the franchise fee? The franchise fee is usually a large sum of money paid to the franchisor once the agreement is signed. Therefore, it is important to know the advantages that the franchisee will be getting in return.
How intensive and effective are the initial and continuing training programs of the company for opening and running the franchise unit? The quality of the training programs of the company for start-up operations and running the business smoothly will determine the ease or difficulty with which the franchisee will run his unit.
What support services can the franchisee expect from the company on an on-going basis in terms of helping him deal with problems that may crop up in the course of the business? Continuing support from the franchisor is essential for the unit to run as projected. The franchisor must be able to enumerate in detail the support services that the company will provide in a variety of scenarios wherein the franchisee is confronted by different problems relative to the business. These problems may concern labour, customer complaints, equipment breakdown, and stock shortage.
Is the central management transparent in the appropriation of pooled funds for advertising and promotions? Did the past marketing programs of the company have a positive effect on sales? Part of the unit’s revenues is paid to the franchisor for the company’s advertising and promotions, therefore, the franchisee must know how well the company handles this fund and if its past marketing programs helped boost sales for its franchisees.
Is there a guarantee from the franchisor that the quality of the products and services offered by suppliers through him will be consistent and delivered promptly? The reliability of suppliers will be a big factor in the successful operation of the business. Hence, it is important that the franchisor is willing to guarantee the dependability of his suppliers and the quality of their products and services.
How long will it take the franchisee to recoup his investment? Naturally, every franchisee is very keen on knowing the company’s projection on this matter. The franchisor’s estimate must be supported by documents giving credence to his projection. However, it would be wise for the franchisee not to merely take the franchisor’s word for it but to research on the matter with other franchisees.
How well has the company studied the marketplace in terms of the ideal number of franchises in a given area to ensure the success of each? Is there a guarantee that the company-owned unit will not compete with the franchises? If it does, what will the company do? There are instances wherein the mother unit directly or indirectly competes with its franchise perhaps due to lack of a proper market study. In any such case, the company must be prepared with a viable solution that will be beneficial to both parties.
How receptive is the company to the idea of adapting its products and systems to the culture and preferences of the market in a given location? If the franchisee is considering a business site wherein the culture and preferences of the people are markedly different from that where the mother unit and other franchises are located, it would be detrimental to the success of the franchise if the company will persist in strictly adhering to its original product line.
A franchisee must carefully list the questions before arriving at the final decision. The aforementioned questions are only some of the most basic among the crucial questions that a sensible franchisee must ask. The manner by which the franchisor answers them can help determine the level of his sincerity. In addition to asking the franchisor, the franchisee will be able gather valuable insight into the actual state of the franchise from the other franchisees themselves. More often than not, they are more than willing to share their problems, frustrations, and advice. Asking the right questions will certainly help the prospect make the right decision