Questions to Ask Existing Franchisees

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A key ingredient in any prospective franchisee’s evaluation of a franchise opportunity is to visit exist- ing franchisees and ask them questions about their relationship with the franchisor. “What you need to know from franchisees is what the franchisor does that makes it worth the fees,” says one franchise consultant. The following questions will reveal how well the franchisor supports its franchisees and the nature of the franchisor–franchisee relationship: How much did it cost to start your franchise? How much training did you receive at the outset? How helpful was it? How prepared were you when you opened your franchise? Does the franchisor provide you with adequate ongoing support? How much?Are you pleased with the level of support you receive? What is the nature of this support? Is the company available to answer your questions? How often do you contact the company? What is the typical response? How much marketing assistance does the franchisor provide? Is it effective? How can you tell? Do franchisees have input into the development of new products or services? Which of your expectations has the franchisor met? Failed to meet? How often does someone from the franchise check on your operation?What is the purpose of those visits? What is a “typical day” like for you? How do you spend most of your time? Which day-to-day tasks do you enjoy performing most? Least? How much did your franchise gross last year? How much do you expect to gross this year? What has been the pattern of your outlet’s sales since you started? Is your franchise making a profit? If so, how much? What is your net profit margin? How long did you operate before your outlet began to earn a profit?Is your outlet consistently profitable? What is your franchise’s break even point? How long did it take for your franchise to reach the break even point? Has your franchise met your expectations for return on investment (ROI)? Is there a franchisee association? Do you belong to it? What is its primary function? Does the franchisor sponsor system-wide meetings? Do you attend? Why? Does the franchisor listen to franchisees? What changes would you recommend the franchisor make in its business system? Where do you purchase supplies, equipment, and products for your franchise?Are the prices you pay reasonable? How much freedom do you have to run your business? Does the franchisor encourage franchisees to apply their creativity to running their businesses or does it frown upon innovation in the system? Has the franchisor given you the tools you need to compete effectively? How much are your royalty payments and franchise fees? What do you get in exchange for your royalty payments? Do you consider it to be a good value? Are you planning to purchase additional territories or franchises? Why? Has the franchisor live dup to its promises? Looking back, what portions of the franchise contract would you change? What are communications with the franchisor like? How would you describe franchisees’ relationship with the franchisor? How would you describe your relationship with the franchisor? Are most franchisees happy with the franchise system? With the franchisor? What advice would you give to someone considering purchasing a franchise from this franchisor? Knowing what you know now, would you buy this franchise again?

Sources: Based on Carol Tice, “How to Research a Franchise,” Entrepreneur, January 2009, pp. 112–119; Andrew A. Caffey, “Analyze This,” Entrepreneur, January 2000, pp. 163–167; Roger Brown, “Ask More Questions of More People Before Deciding, Then Plan to Work Very Hard,” Small Business Forum, Winter 1996/1997, pp. 91–93; Roberta Maynard, “Choosing a Franchise,” Nation’s Business, October 1996, pp. 56–63; Andrew A. Caffey, “The Buying Game,” Entrepreneur, January 1997, pp. 174–177; Julie Bawden Davis, “A Perfect Match,” Business Start-Ups, July 1997, pp. 44–49.

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