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Three Questions Franchise Candidates Almost Never Ask

by Ed Teixeira

 There are certain steps in the franchising process that individuals should follow, before committing to a specific franchise opportunity.

The first step for a candidate is to do an inventory of their personal and business skills along with their financial resources, which I refer to as The Franchise Profile. The candidate should use The Franchise Profile to match franchises with the best fit.

Once a franchise opportunity is identified, the next step, which is the most important step in the process, is to evaluate the franchise by performing a thorough due diligence. This should include; utilizing a franchise attorney and financial advisor at some point, speaking with franchisees and seeking answers to a number of questions.

When it comes to which questions to ask, there are countless resources. These include the FTC and various state websites, numerous articles on the Internet and various franchise associations such as the IFA and AAFD. However, there are three important questions that are unlikely to be found on any of these sources.

Three Questions Franchise Candidates Almost Never Ask:

1. Does the franchisor have a strategic or comprehensive business plan? A successful business organization will typically have a strategic or business plan. The fact that a franchisor has a formal strategic plan indicates an organization that has a vision and the roadmap to fulfill that vision. Conversely, if a franchisor doesnít have a strategic or business plan it doesnít necessarily mean that investing in the franchise would be a bad decision, however, a franchisor that does have a written plan indicates a well organized company with written goals and objectives.

2. How does the franchisor conduct new franchise development?
During the course of my long franchise career, I could count on one hand the number of prospective franchisees who wanted to know what our objectives for growth were for the next 3 to 5 years and how we intended to reach those goals. Iím not referring to a long winded explanation from franchisor staff but rather a concise response. Most franchisors are willing to present their future development objectives In fact, Item 20 in the Franchise Disclosure Document reports on how many and in which states the franchisor intends to add locations for the upcoming year. How they intend to do this whether by utilizing in-house staff, brokers or a combination of both can reveal how committed the franchisor is to this growth.


3. What is the process and results of franchisor dispute resolution?
A list of suggested questions might include; who should the franchisee contact if they have a major problem or issue? After being told who to contact the question is usually considered answered. However, the question should include an explanation of how some significant franchisee problems or issues were resolved. If there is no reported litigation in the FDD itís a good indication that franchisor-franchisee relations are positive. It could mean that the franchisor is able to resolve disputes and avoid a situation from getting out of control. Bottom line is that a franchise candidate should obtain as much information as possible about dispute resolution and if not satisfied with the response: then you have an issue contact your regional representative.


There are a number of steps that need to be taken when evaluating a franchise opportunity. These steps include seeking answers to a number of questions. The above three questions if properly presented and answers pursued can provide significant insight into a franchise operation.
 

© 2015 FranchiseKnowHow, LLC

Ed Teixeira is the President of FranchiseKnowHow.com and Chief Operating Officer, FranchiseGrade.com. He is a former franchise executive and franchisee. He can be contacted at 631-246-5782 or at  franchiseknowhow@gmail.com

 

 

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