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    1 Reply Latest reply on Jun 22, 2009 9:58 AM by harishmanek

    Ready to buy a franchise? 15 questions to ask first

    TopFranchise Newbie
      Question 1:

      How will Franchise Support Staff mentor me to be a success and guide me through problems that come up? *

       

      One
      of the advantages of buying a franchise business opportunity opposed to
      starting a business from scratch is the support you can expect from the
      franchise system. While every franchised business will tell you that
      they have a dedicated support team, the quality of support given can
      differ drastically from one system to another.

      Question 2:

      How will Franchise Support Staff personalise support for my business?*

       

      Staying
      within the broad topic of support, the next question that arises is how
      flexible and adaptable the support team is. Every franchisee will bring
      a different set of skills and experiences to the table. Similarly,
      every unit will be slightly different to the rest depending on factors
      such as its location, staffing requirements and set-up. It is,
      therefore, not only important that there is a good support structure in
      place but also that it can be adapted to individual situations.

      Question 3:

      Do the Franchise staff selling me the franchise listen to my needs?*

       

      We
      have all been sold something before that we actually didn't want or
      didn't need. While it is frustrating no matter how little we paid for
      the unwanted item, it can be quite disastrous if this happens with a
      high cost and commitment item such as buying a franchise.

      The
      best franchise business opportunities will not just take anyone who is
      willing to pay. They will make sure that the franchisee and the
      business are right for each other to save the prospective franchisee
      and themselves grief. So, it is a good thing if the representative of
      the franchise business you are speaking to asks you questions on your
      background, your professional experience, your goals and ambitions.

      Question 4:

      How well known is the Franchise brand in the area I am looking to operate in?*

       

      One
      of the main reasons for people to become a franchisee is that they can
      leverage of a well known and trusted brand name. It can take years to
      make yourself known and build a reputation on your own. So, franchise
      opportunities allow you to fast track this process provided that the
      franchise system has done its homework and looked into brand awareness
      in the area you are looking to operate in. The level of local area
      marketing that will need to occur to generate business will depend on
      the level of knowledge and the reputation of your offering in the area.

      Question 5:

      How does the Franchise differentiate its product, service and experience to make it different to other businesses?*

       

      It
      is important to identify what your prospective franchise opportunity's
      offering is and what it is that sets it apart from your competition.
      You will make your living from what you are offering, so your success
      will depend on the demand for your products or services.

      Question 6:

      What research methods will the Franchise use to help me select a location to operate in?*

       

      Location,
      location, location: are you going to be at the right place at the right
      time and how is the franchise business going to define "right"?
      Ideally, "right" should be backed by some solid research into the
      demographics of the location. These need to be representative of your
      target audience. Otherwise, you will struggle to sell your offering.
      The characteristics of the locations of current franchisees that run
      their business successfully will give you an idea what a good location
      looks like and where you will be more likely to be successful yourself.

      Question 7:

      What research methods will the Franchise use to conduct ongoing research in my customer market?*

       

      Over
      the last 12 -18 months, we have seen consumer behaviour shift
      dramatically due to the economic turbulence. People buy for very
      different reasons and base their decisions on very different factors
      than they did at the end of 2007. Not many companies can afford to keep
      offering the same product or service lines regardless of what happens
      around them. It is important that your head office is sensitive to
      changes and proactive in understanding the customer market overall and
      in specific areas in particular.

      Question 8:

      Please explain to me how easy the business model is to operate.*

       

      The
      easier the business model of the franchise company is to understand,
      the easier it is to follow. The business system has been put in place
      to make operating the business for franchisees as simple as possible.
      Many franchisors have reported that franchisees who follow the system
      are more likely to be successful than franchisees who don't. Put the
      franchise company you are interested in joining to the test and let
      them explain to you how easy the business model is to operate. If you
      can't understand how it is meant to work in practice, you may struggle
      to follow it once you have purchased your franchise.

      Question 9:

      Can you please give me examples of how different franchisees have performed financially?*

       

      Asking
      for multiple examples of financial performance increases your chance to
      see a good cross section of performance levels and to get a realistic
      idea of what you can expect from your business if you put in the
      effort. This is also a good opportunity to ask the franchisor how the
      franchisees achieved good margins.

      Question 10:

      What guidance do Franchise Support staff provide to help me monitor the financial performance of my business?*

       

      Not
      all of us are trained accountants and some of us are better with
      numbers than others. Nevertheless, keeping control of the financial
      performance is vital for every franchisee to be successful. Support
      staff should assist you with the task of tracking your financial
      performance to make sure that you make financially sound decisions.
      Support staff need to have the appropriate level of experience and
      training to be able to assist you on that level. You will receive the
      most qualified support with your financial performance if there are
      trained accountants and/or financial planners in the support team.

      Question 11:
      *For the upfront Franchisee fee that I pay, what services will I get
      from Franchise Management to help me start my business?*

      You
      may find that the franchisee fee is one of the hardest points
      comparison between franchise business opportunities. This is because
      every franchise business will include and exclude different items. To
      compare apples with apples, you will have to identify what the fee
      includes and what other costs you will need to cover setting up your
      business.

      Question 12:

      What do I get in return for

      the ongoing royalty fees I have to pay to the Franchise and or for the
      products I have to buy from the Franchise?*

      This is
      another value for money question that will need some attention since
      the agreements vary from franchise opportunity to franchise
      opportunity. Franchise companies either charge a flat or percentage
      based royalty fee to their franchisees or will legally bind their
      franchisees to purchase products only from the franchisor. In return,
      franchisees receive services such as training and support from the
      franchise company.

      Question 13:

      What ongoing

      services will the Franchise provide me to help me continually improve
      my business' performance and personal skills?*

      Every
      business owner, franchised or solo, will agree that a business is
      continuously progressing, adapting, inventing and re-inventing. Of
      course, initially, the main challenge is to get your head around the
      day to day business. But even once you have established your routines,
      you will be faced with new challenges on a regular basis. Depending on
      your own and your franchisor's ambitions, you may even seek new
      challenges yourself, for example, by taking on multiple units or a
      mentoring role to pass on your experiences to new franchisees.

      Understanding
      what ongoing services will be provided to you to help you master and
      excel at your day to day business as well as to be able to take on new
      challenges is crucial since this is going to shape your professional
      future.

      Question 14:

      How much of the money I

      contribute to marketing will be used for local area marketing? And how
      will you help me to use this money effectively?*

      Marketing
      is a must do activity for every business, so it is important to
      understand how the franchise business is set up in this regard. Most
      franchise businesses will charge a marketing levy and take care of
      national branding and awareness campaigns. Local area marketing is
      often left to the franchisees themselves with varying levels of support
      from the head office. Some franchise systems charge a lower marketing
      fee but will require you to spend a certain percentage of your earnings
      on your local area marketing. Considering the importance of it, this is
      not a bad thing.

      Having the money to spend is only one side
      of the coin though. Not all of us are trained marketing specialists or
      can afford a hit and miss approach to find out what works best.
      Therefore, we would recommend to you to ask whether the franchise
      business gives you access to assistance in using your local area
      marketing funds effectively.

      Question 15:

      Last but not least, question 15 is a question to ask one or more existing franchisees.*

       

      Would you recommend that a friend or business colleague of yours should become a franchise owner in this franchise system?

      The
      power of this question lies in the wording: asking if they would
      recommend the franchise business to a friend or colleague is different
      to asking whether they would recommend the franchise business to you -
      unless you are a friend or colleague of theirs. While they may find it
      easy to recommend the franchise opportunity to you, they may think
      twice about recommending it to a friend or colleague since they are
      putting their social reputation on the line. So, this question is a
      fantastic way of gauging their real sentiment towards the franchise
      business.

      We ask this question in our satisfaction survey.
      You can find the top 10 franchise business opportunities for their
      franchisees' willingness to recommend the franchise business to their
      friends and colleagues in the Top 10 in Different Categories section
      under "refer".