The franchise model is a great way to leverage a reputable brand’s name and run a business without having to work on making your name known. It has been a particularly successful idea for fast food companies, with franchises extending all over the world. These franchises are regulated and supported by the parent company, with workplace investigation taking place regularly. Therefore, buying a franchise can help you earn well, and enjoy the reputation and support of a major corporation.
However, like with anything, you shouldn’t go into this venture blindly. Instead, you should make sure your franchise will be viable and profitable. To do this, you must ask the owner a list of questions and demand clear and honest answers. This will help you gauge how successful your franchise may be for you, and whether the company will take measures to promote your success. Here are a few questions to start off with.
What Is the Criteria for Choosing a Franchisee?
First of all, confirm whether you’re eligible to run a franchise. Every company will have a set criteria for who can become a franchise owner. These can include age limits, location, financial status, and others.
Before you do all the effort involved in applying for a franchise, you should confirm whether you’ll even be considered. Do not waste time and effort in submitting forms and other details if it’s not possible for you to be accepted.
How Much Do I Have to Invest to Get Started?
You should confirm how much money you need to invest to get the franchise. This money will involve equipment, land lease, infrastructure and franchise fees, among others, so you need to get a clear final number. This will help you make a decision and gather the required resources. It will also let you determine if your franchise will be worth it in the long run.
How Do Your Marketing Costs & Royalties Work?
Companies charge franchise owners for marketing campaigns, and these fees can be quite hefty. Therefore, you need to confirm the exact details. In addition, work out whether the franchise runs on a profit-sharing basis or whether the company asks for a certain percentage as royalties.
If possible, negotiate at this stage and get yourself the best deal possible. Additionally, if there seem to be a lot of hidden and miscellaneous fees involved, ask for clarification. Do not go into the business with any doubts in your mind, otherwise you may suffer major financial losses.
How Many Other Franchises Are There & How Are They Doing?
You should make it a point to look up other franchises of this company and also ask the owners about them. Ask how many franchises there are, and how many of them are profitable. Also confirm how long it took them to break-even and become profitable, with details about what area they operate in. Once you have these details, you’ll have an idea of what to expect from your franchise. In addition, you can gauge the franchise owner’s level of transparency and how much information they’re willing to share with you. This is essential for any working relationship.
How Much Money Can I Make?
This is the big one. The answer to this question will have a major influence on your final decision. Ask how much money you can make with the franchise and how long will it take to break-even and then be profitable. Often, it takes some time for franchises to justify their initial investment, and then start bringing in money. Get an estimate of this timeline, and gauge if you can stay afloat until then. If you can’t afford to be unprofitable for more than a few months, you might have to change your mind.
What Support Will You Offer?
Companies who franchise their brands want to retain a certain level of quality and reputation. To that end, they often run training programs and conduct franchise investigations regularly. This helps keep the franchise up and running, and preserves a certain set of standards.
When buying a franchise, ask the company how often and to what extent this support will be, and what these investigations will entail. Also confirm how the company will materially support your franchise, and if there is proprietary equipment and methods involved.
What Will My Jurisdiction Be & Is It Protected?
This is a major question and you should never forget to ask it. This will be the make or break factor for your franchise’s success and level of competition. Ask what your branch’s jurisdiction will be and whether the territory’s exclusivity will be protected.
You don’t want another franchise of the same brand popping up right down the road. This will split your customers and adversely affect your profits. Make sure your territory is protected and the company does not license franchises to anyone in it.
What Level of Input and Deciding Power Will I Have?
Many brands want to control every aspect of their franchises and ensure uniformity across the board. However, there are some brands who give you more freedom with what you want to do with your franchise. You need to confirm how much leeway you’ll have in this regard, and what your level of input will be. Often, you’ll only have a little deciding power, so you should consider what you would prefer.
To sum up, you must ask these questions if you’re thinking of buying a franchise. They will help you make the right decision for you.