Advice & Tips Ask an Expert November/December 2019

Q. As a first-time franchisee, what are the five rock star questions I should ask?

If you’re thinking of investing in a franchise so you can be in business for yourself but not by yourself, you’re already probably wondering things like “what is the initial investment?” and “how much money can I make”?

Since becoming a franchise partner in a brand typically requires a heavy contractual agreement with a five or 10-year term and a lofty upfront investment, it’s in your best interest to take the time to make sure it’s a fit from which you’re going to get your anticipated return on investment.

Let’s dig deeper on what questions you should ask to not only help you get some clarity on whether it’s a good franchise to invest in, but also to impress the prospective franchisor (wink wink).

 1. We’re on a mission!

A common misconception is that because the brand is a franchise, the franchisor will take care of all of the promotional marketing, sales, etc. to grow the business. This is rarely the case – a critical reason franchisors chose the franchise model is to have local partners who can do “boots on the ground” local marketing. If you’re choosing the concept because of the potential financial ROI and you don’t love the brand, it will be very difficult to go and build business in your local market.

 2. We’re on a mission!

A sign of a successful company is one that is uber clear on the foundation of why they exist and the core values that drive their decision making. Start by lifting the hood on the company’s mission, or sometimes referred to as the company’s “why,” and make sure it resonates with you so that you’re aligned and set up to succeed.

Next, find out what their core values are and what processes they have in place to ensure that everyone in the organization lives and breathes these core values. Do the core values sound authentic, and do they get you excited?

Be leery of companies that don’t even know their purpose and core values, or that have core values that are stale and uninspiring and not at the forefront of how the company operates.

When there is a lack of fit, rarely does anyone end up winning!

3. Help me!

Find out what support systems the franchisor offers for its franchise partners. If the response is “they have our number and can call us anytime,” this can be a big red flag, as it can mean that the franchisor leaves you to fend for yourself. Most franchisors have the technical support figured out, but not every franchisor really understands how to work with their franchise partners to make the relationship feel like a true partnership.

Some probing questions to ask the franchisor or franchise partners include:

  • How often do we see our field support team in person?
  • How can I share my input and ideas?
  • How does the company keep everyone in the loop on the same page?
  • What strategies does the company use for helping franchisees build their business and ensure profitability?
  • What kind of tools and resources does the franchisor provide – and how?

The beauty of being an operator in a franchise system is that you have access to a multitude of other operators running the exact same business in a variety of markets.

Having been a multi-unit franchisee for 18 years, I can say with confidence that even if you’re a business-savvy operator, you can still benefit from structured, regular two-way communication that ensures you’re clear on benchmarks, market trends, and what top performers in the chain are doing to maximize their opportunity.

4. Read between the lines

Check into how many transfers and/or closures the franchise company has experienced and why.  For example, if you find out that multiple units have closed due to poor locations, it may be a red flag that the company doesn’t put enough resources into ensuring the location is the right fit. Transfers can indicate anything from an operator realizing the opportunity wasn’t a fit for them to the franchisor not selecting the right people.

If the franchisor isn’t clear on who they’re looking for, how do they know you are going to be a fit? And who else is being brought onto the team who isn’t the right fit and is going to dilute your investment as a poor operator?

5. Tech talk

Technology is such a critical component to small business success. The right technology creates efficiencies at the franchise level, which leads to increased profitability and satisfaction.  Some questions to ask around technology include:

  • Is the technology simple and easy to use, and does it do what the franchise partners need it to do to maximize profitability?
  • What is their communication hub like i.e. How and where can I easily communicate with headquarters and my franchise peers?
  • What metrics are available through technology to benchmark where I am compared to other locations?
  • What do the current franchisees think of the technology?

When it comes to ensuring a franchise system is the right fit, taking the time to do you due diligence is critical. Unfortunately, I come across too many franchisees who feel they went in without digging deeper on the things that are important and before really understanding the company. Don’t be one of them – slow things down a little now, as it will pay off in spades in the long term. Ask the rock star questions so you can unleash your full potential and optimize your success.

Angela Coté
Franchise/Business Advisor
Cultivate Advisors