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Research Right: The Essential Questions

18 July 2012

If you’re considering buying a franchise, there’s no better time to get down to the nitty-gritty, explore your options and ask the right questions than when you’re face to face with the franchisor.

Get the information you need direct from the source at the Franchising and Business Opportunities Expo. Here’s an idea of some important questions to ask:

The franchise structure

To get a feel for the franchise as a whole and those behind it, start by asking about the franchisor. How long have they conducted the franchising business? What is their vision for the franchise network? What experience and qualifications do the franchise executives hold? Ask about how many franchises currently exist and the track record for success. Also discuss who the major competitors are and the reputation of the franchise in the marketplace.

Costs involved

It’s essential to explore and understand the financial obligations involved in operating a franchise. Enquire about the payments required to be made to the franchisor: initial franchisee fees, royalties, advertising levies, training fees, equipment and stock costs. How are these payments structured? Also be sure to ask for details about any costs that may be incurred independently by you, such as rent, insurances, employee uniforms and wages.

While exact figures are of course impossible, overall questions about profitability and growth are important. How much total investment will this franchise require? How long will it take my new franchise to break even? How much do existing franchisees typically make? These will all help you to evaluate your potential return on investment as accurately as possible.

Business premises

Will you lease the premises directly or through the franchisor? Who will conduct repairs or improvements? What happens if the lease ends at an earlier date than the franchise agreement? Also enquire about how franchise territories are determined, and if any territory restrictions apply to marketing activities.

Exiting the agreement

If the franchise is granted for a specified time period, there are important questions to ask about exiting the agreement. Can either the franchisor or franchisee terminate the agreement early? Will you be entitled to an exit payment? Is it possible to renew the agreement or will you have the right to sell the business?

Success rates

Some of the best research comes from talking to other franchisees! Ask the franchisor for a list of current and previous franchisees so you can talk to as many people as possible about their experiences. Discuss profitability and earnings, as well as franchisor support and the reality of daily operations. Be sure to call some who are no longer in business, but aim for a good cross-section of opinions for level feedback.

Register for free tickets to the upcoming Franchising and Business Opportunities Expo, which will be visiting Brisbane on July 21-22 and Melbourne on August 17-19.