Questions You Need to Answer Before Buying a Franchise
by Ed Teixeira
Before you decide to purchase the particular franchise that you like you
should answer the following questions.
Prospective franchisees should follow a specific process when evaluating a
specific franchise opportunity. Here are 25 questions that you need to ask
yourself before taking that final step. Of course be sure that you have a
positive response to each question.
1) Do you understand that most new businesses, including franchises, typically
do not reach break even for at least one year after start-up?
2) Do you have the savings or resources to provide for at least one year’s
expenses after you have paid for the franchise.
3) How long has the franchisor been in business?
4) Does the franchisor have a franchise sales department or does it rely upon
brokers or developers to sell the franchise?
5) Are you prepared to relinquish some of your independence when operating as
6) Do you, your partner or spouse have experience working in or operating a
business comparable to the franchise you’re considering?
7) Have you engaged the services of an accountant and franchise attorney?
8) Has your accountant thoroughly reviewed the franchisor’s financial
statements? What is the ratio of initial franchise fees to on-going royalties?
9) Has your attorney reviewed the rights that the franchisor will retain
regarding control over your operations and marketing?
10) Will the franchisor agree to negotiate certain terms of the franchise
11) Will you be required to execute a blanket personal guaranty for the
12) Have you spoken with existing and former franchisees?
13) Have you asked existing franchisees if the franchise has met their financial
and training expectations? If not where has it fallen short?
14) Does your franchise agreement allow the franchisor to sell to customers
in your territory either directly or via the Internet?
15) Has the franchisor experienced franchisee terminations in excess of 10%
of total franchisees? If yes, look into why.
16) How does the franchisor configure the franchisee territory?
17) Will the territory allow for sales growth and sufficient demand during a
18) Do you feel confident that the demand and prices for the product or
service you’re selling is sufficient in your proposed territory?
19) What is the level of competition in your territory?
20) Have you done a business plan and cash flow projections?
21) Has the franchisor provided you with any expense and suggested pricing
22) Has the franchisor had any encroachment issues with its franchisees or
among franchisees? If yes, how were they resolved?
23) Does the franchisor have a strategic plan? If yes, will they share it
24) Does the franchisor have a National Accounts program? How does it work?
25) Have any of the franchisor representatives exerted pressure on you to
purchase the franchise?
Once you’ve answered these questions you’ll have a more complete profile of
the franchise opportunity and the franchisor. This exercise will increase your
potential for a successful franchise.
© 2013 FranchiseKnowHow, LLC
Ed Teixeira is the President of FranchiseKnowHow, LLC. He can be reached at