The Irish Franchise Associations have published 20 questions you should ask a Franchisor before you make the decision to buy into a franchise – reproduced here, with kind permission of the Irish Franchise Association.
If you are considering joining a franchise you will need to carry out due diligence before coming to a decision. Any established, reputable franchisor will be ready to answer your questions and introduce you to the rest of their network. Here we take a look at the important questions to ask before making the jump;
- How long have you been in franchising?
- I’d like to get in touch with some current franchisees, can I have an up to date directory of your network and their contact information?
- What is your head office structure like?
- How many franchisee failures have you had?
- How much does your franchise opportunity cost, what does this price include and what capital costs will be incurred in addition to this price?
- How much working capital do I need?
- What will be the gross profit margin and what costs will I incur in arriving at a net profit?
- Can I see a detailed business plan?
- What financing arrangements can you make and what terms for repayment will there be?
- What are your fees?
- Do you take any commission on supplies of goods or materials to a franchisee? Do I have to purchase all or just scheduled items from you? Does this apply to equipment?
- Will I be obliged to maintain a minimum fee or minimum purchase of goods? What happens if I fail to meet this commitment?
- Do you train me? Who pays for my training? Where do I go for training?
- For how long is the franchise granted? What happens at the end of that period?
- Does your contract permit me to sell my business? What restrictions are there affecting my rights to sell the business?
- What will happen if I do not like the franchise business? Upon what basis can I terminate the contract?
- What systems do you have for keeping franchisees in touch with you and each other?
- What advertising and promotional expenditure do you incur? Do I have to contribute to it, if so how much?
- What marketing do you currently carry out at head office?
- What help will I receive in local advertising and promotion?
It is normal to meet with your franchisor several times before making a decision so you will have plenty of time to ask all of these questions. Meeting existing franchisees and asking them about their experiences should also be an important part of your decision making process.
In addition, it is crucial that you receive independent, legal advice on your franchise agreement.