A franchise is an excellent way to capitalize your opportunities and exercise your skills in entrepreneurship. Before buying your own franchise, it is necessary to get familiar with the type of business you are interested in by coming up with the right questions for the franchisor such as the following:
1. How many franchises are there and where are they situated?
This provides you an idea if the area has other franchises such as automotive franchises that might put your business in direct competition. Knowing this will help you assess if the location is profitable or not.
2. Are training and assistance provided?
A number of franchisors provide assistance and training to new franchisees to start the business and have it running successfully. Sometimes the training is not free so better inquire if additional expenses would be needed.
3. What are the initial and long-term fees and costs?
Some franchisors charge upfront fee so you have to prepare for it before you start franchising. You need to have an appropriate fund to pay for additional fees and other expenses throughout the duration of the business. You also need to ask your franchisor regarding the royalties you have to settle, if there are any.
4. How are other franchisees treated?
Talk to other franchisees to learn the pros and cons of the franchise that you are interested in. They can provide you answers regarding the business instead of asking the franchisors who are more likely to sugarcoat everything.
5. What is FDD or Federal Disclosure Document?
Franchisors are required to provide FDD. The FDD contains the company’s litigation history, which lets you know if the franchisor has been involved in lawsuits or if the franchisor has filed for bankruptcy before. Knowing the franchisor’s financial competence and the risk that you have to face when you purchase the franchise is a big help.
6. What is the previous profitability of the franchise?
Analyze the franchise’s profit margins to know if the business is worth investing in or not. Seek a legal professional to analyze the franchise’s earnings so as not to be misled.
7. What are the restrictions?
When you buy a franchise you are expected to adhere to its restrictions. In most cases, you have to give up and sacrifice your business-oriented freedom and follow the established business model.
Starting your own franchise can be profitable however you need to operate by certain guidelines and rules, which can either help you or hurt your business. As a buyer, you need to spend more time researching on the franchises for sale prior to buying one and the questions provided can help you a lot.