Top 5 Questions to Ask Before Buying a Franchise


buying a franchiseFranchise ownership can be a great way for an individual to find success in owning their own business; buying into established franchises can reduce many of the difficulties that come with starting a new business.

In the world of franchising there are countless franchise concepts in countless business industries and ultimately some will be a better fit for you than others—so how do you determine which franchise will be the best fit for you? Here are five important questions to ask the franchiser when researching a franchise for sale.

1. How much will it cost to get started in your franchise?

Franchise opportunities can be found across a wide range of business industries, so the investment level required by the franchiser can vary drastically. When looking to buy a franchise the initial franchise fee AND the total startup costs should both be carefully considered.

Furthermore, it is important to fully understand your financial situation and how much you are willing to spend before researching which franchise to buy. If the startup cost for a franchise is far beyond your financial reach, then it doesn’t make sense to waste your or the franchiser’s time researching the concept.

2. What are the ongoing costs associated with being a part of your franchise?

You should not only consider the initial costs that it will take to start the franchise, but also the costs that you will be required to pay on an ongoing basis.  It is common for the franchisee to pay the franchiser a continual royalty fee and advertising fee.

These fees are usually a percentage of the franchisees total sales and are dependent on each franchiser.  Often, the franchiser will also expect the franchisee to pay other additional ongoing fees. Before buying a franchise you should understand all of the ongoing costs associated with owning a particular franchise.

3. How much training do you provide to your franchisees?

Much of the appeal of buying into an established franchise is that they have a proven business model. All successful franchisers will supply their franchisees with an operations manual and at least some initial training.

The amount of initial training and the amount of detail provided by the operations manual will differ from franchise to franchise. Additionally, some franchisers will provide ongoing training support for new staff hired by the franchisee. The extent of the franchiser’s involvement in each of their franchises may make one franchise opportunity a better fit for you than another.

4. What are your views on the growth potential of your industry?

It is not logical to expect a business to thrive in an industry that is failing. When prospecting new franchise opportunities it is wise to not only consider many different concepts, but also to consider multiple industries.

Determining which industries have the best growth potential is a good indicator of whether or not the franchise has good growth potential.  Any successful franchiser will know their industry well and should be able to thoroughly explain how their franchise meets the needs of its industry.

5. If/when I want to exit the franchise, what are your restrictions around transfer of ownership?

As a business owner it is always a good idea to be forward thinking. How long do you plan to own the franchise? What will you do if for some reason you need to exit the business? Thus, having a thorough understanding of what it will take to exit the franchise before you buy the franchise is a good idea.

Franchise ownership can be the path to great success for many, but having a comprehensive understanding of the costs and the benefits of a specific franchise is essential before making the final decision to purchase.

Photo credit: timkinser.com

Dylan Shrader is the General Manager of FindAFranchise.com and BizQuest.com, two great resources for entrepreneurs looking for franchise opportunities or businesses for sale.


Business.com Editorial Staff

Business.com Editorial Staff

Author's Website: http://www.business.com

Author's Social Links: Author Google Plus Profile Link Author Facebook Profile Link Author Twitter Profile Link Author LinkedIn Profile Link

The Business.com Editorial Staff writes on topics relevant to small and medium-sized business (SMB) owners. Posts cover best practices, top tips, and studies that deliver insights specific to SMBs.

Our team has backgrounds in journalism, English, philosophy, marketing, entrepreneurship and management, providing us the opportunity to share unique viewpoints on all things affecting small and medium-sized businesses.

Posts by Business.com Editorial Staff

10 Inspiring Entrepreneurs Under 40

Quote of the Day – July 25, 2014

What Target Should Have Done to Prevent Their Security Breach

Quote of the Day – July 24, 2014

Quote of the Day – July 23, 2014

See all posts from this author »


View Comments

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>