Before You Buy- Questions That Should Be Asked

Posted on October 03, 2011 by Ben Baggett

Before you go into a legal agreement with any franchisor, there are many questions that need to be asked. Here's a short list of questions to ask and why they're important:

       How much do I have to invest before I can open my doors?

·    When looking into franchises, find out exactly how much you will have to invest. Some franchises may not include equipment, location rent, and inventory in your overall investment figure when buying into the business. Talk with the franchisor and ask what is included in the initial investment. Most franchisors will help you estimate the total cost of investment based on location, rent, and other values.

       How many other locations are there? How are those businesses doing financially?

·    Finding out how many locations there are nationwide allows you to estimate the success and popularity of a franchise. This does not mean that a franchise with fewer locations isn't success though. Many factors have to be look at, including how each franchise is doing. A franchise may seem great until you look at how many have closed recently.

       What sets you apart from "…"?

·    Ask the franchisor what sets them apart from their competitors. What's the differentiating factor that will help you 'sell' your business to potential customers? All franchisors that compete in a very crowded market, such as retail franchises, should be able to rattle off something within a few seconds. If a franchisor has a hard time differentiating their business, this could be looked at as a warning sign.

        What kind of input do I have in marketing and advertising?

·    Some franchises will allow you to take over marketing and make decisions based on what works in your area. Some franchisors have complete control over marketing and advertising (an example would be national food franchises).