Posted on: 30 January 2015
Buying into a franchise is a major investment. Just like with any other big purchase, it is important to do your research first.
Once you’ve identified a franchise business that suits your experience and interests, the first thing to ask yourself is ‘will I get on with the franchisor?’ As a franchisee you will be working closely with the franchisor to get you up and running and then to support you as you grow your business. If you can’t establish a strong working relationship then your venture is likely to struggle. Also consider speaking to existing franchisees to see how you would fit into the network.
Once you’re comfortable that you’ll get on, here are four questions to ask the franchisor before signing on the dotted line:
1. How successful is this franchise? Research how strong the franchise business has been in the past and the failure rate of its past and current franchisees. Ask the franchisor if you can review their finances. How often are franchise units changing hands and can you speak to any failed franchise unit owners to find out what happened?
2. What does the ongoing support look like? Once the initial training is over and your business is up and running, what level of support will the franchisor provide? Find out who’s available, when and what they can help you with as part of your agreement.
3. How is your area protected? Scrutinise the Franchise Agreement to understand the franchisor’s guarantees that they won’t open up their own outlets or sell other franchises on your patch. Discuss any concerns with the franchisor.
4. Will you make enough money? The bottom line is that you’re joining the franchise to make money. If the numbers simply don’t add up then talk to the franchisor about your options. If it still doesn’t make sense for you financially, you may have to walk away.
Use the content guide below to answer your franchising questions:
- What are the advantages and disadvantages of franchising?
- Does my business suit the business model?
- What do I need to consider when setting up the franchise?
- What are my options for funding a franchise?
- How do I recruit the right franchisees?
- What are the advantages and disadvantages for the franchisee?
- Will I suit the franchise model?
- Where do I find franchise opportunities?
- How do I choose the right franchise business?
- What questions should I ask before buying? (You are here)
- How can I finance becoming a franchisee?
- How do I make my franchise successful?
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