#Franchise - Buying a Franchise? Top 25 Questions to ask a Franchisor

Updated: May 28, 2021




Overall questions for Franchisor


Financial related questions


Marketing and Demographics


Operations and Training




 

Overall questions for Franchisor

  1. What are your criteria for choosing a Franchisee?

  2. What is your competitive advantage in your industry, who are your biggest competitors and what makes this franchise stand out?

  3. How Financially strong is the Franchise company? (Item 21 in FDD) Are you owned by a larger parent company? How do you get capital for the Franchise if it’s needed?

  4. What’s the biggest competitive threat in this industry/marketplace? What is the biggest opportunity?

  5. What are the most recent changes and innovations you implemented, and what is on the horizon?

  6. How many locations/units have closed/opened in the last 3 years? Why did the closed units/locations close? (Found in FDD)

  7. What’s happened to the market/industry in the last 5 years? How has this impacted your market share and strategy?

  8. What key performance indicators (KPI’s) do you share with Franchisees?

  9. What kind of periodic calls or conferences do you host for the Franchisees?

  10. Where do you see the company 5 years from now? Are you planning any major strategic changes to this concept?

  11. How long have your top 10% of your AUV performing units/locations been opened/operating?

 

Financial related questions

  1. What will impact the total range of the investment, and how can I keep the total investment lower without sacrificing on opportunity and quality?

  2. What do you disclose in Item 19, and why?

  3. What are the royalties, how do you calculate them and how often are royalties paid? (Are royalties on gross sales or net sales)

 

Marketing and Demographics

  1. What are the marketing fees required, and how often are they paid?

  2. How are the marketing fees used, and how does it support Franchisees?

  3. How do you support Franchisees with local marketing, how many people are on your marketing team?

  4. Has the franchisor conducted any market studies on the territory to ensure that it can support a franchise?

  5. What are the demographics required to support a franchise?

  6. What are the traffic counts required to support a franchise?


 

Operations and Training

  1. How does the initial training work?

  2. What support do you offer beyond the initial training?

  3. How does your supply chain work? Who are the vendors/distributors in my area and how many other locations/units do they support?

  4. What vendors am I required to use and for what can I select my own vendors?

  5. Do you earn more on products purchased by Franchisees? If so, what and how much?

 

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