The 7 Questions to Ask Before Investing in a Franchise
Introduction
Investing in a franchise is an exciting opportunity, but it’s also a big decision. Before committing, you want to ensure that the franchise you choose aligns with your goals, financial situation, and lifestyle. To help you make an informed decision, we’ve compiled seven essential questions every potential franchisee should ask before taking the leap. These questions will not only guide you in your research but also help you identify red flags, evaluate your potential investment, and position yourself for long-term success.
1 What Is the Total Investment Required?
Why This Matters:
Understanding the total financial commitment upfront helps you determine if a franchise is within your budget. Beyond the initial franchise fee, consider costs like equipment, marketing, working capital, and royalty fees.
What You Should Know:
Many franchise brands advertise a low initial investment, but there are often additional costs that franchisees don’t always anticipate. These can include:
Franchise fee – The upfront cost paid to the franchisor for brand rights and training.
Build-out costs – If the franchise requires a physical location, factor in leasing, remodeling, or equipment purchases.
Inventory and supplies – Stocking up on what’s needed to operate.
Marketing fees – Many franchises require an ongoing contribution to national or regional marketing funds.
Working capital – Extra funds needed to keep your business running until it reaches profitability.
Key Questions to Ask:
What are the total startup costs, including franchise fees, equipment, and working capital?
Are there ongoing costs like royalties, marketing fees, or supply costs?
What financing options are available to help cover these costs?
🔹 Tip: We offer financing assistance through Legacy Financial to help franchisees secure the funding they need. Many franchisees secure their investment and cash flow before launching to set themselves up for success.
2 How Much Can I Expect to Earn?
Why This Matters:
While no franchise can guarantee earnings, understanding potential revenue and profitability helps set realistic expectations.
What You Should Know:
The earnings potential varies by franchise and is influenced by factors like location, demand, competition, and operational efficiency. Some brands share financial performance representations (FPRs) in their Franchise Disclosure Document (FDD), giving insight into what existing franchisees earn.
Key Questions to Ask:
What is the average revenue for franchisees in different locations?
What are the typical profit margins?
How long does it take for most franchisees to become profitable?
Are there scalability options that allow me to expand my earnings over time?
🔹 Tip: Request to speak with existing franchise owners to get real-world earnings insights beyond what’s in the FDD.
3 What Kind of Training and Support Will I Receive?
Why This Matters:
Most successful franchises offer comprehensive training and ongoing support to help franchisees succeed. The level of support can significantly impact how quickly and effectively you can operate the business.
What You Should Know:
A strong franchisor will provide structured training that covers daily operations, customer service, financial management, and marketing. Ongoing support often includes:
Dedicated business coaches or mentors
Regional support representatives
Access to online training materials
Peer networking groups and mastermind sessions
Key Questions to Ask:
What initial training does the franchisor provide?
Is there ongoing support, such as marketing assistance, technology updates, or operational guidance?
Will I have access to a community of franchisees for peer support?
🔹 Tip: The more structured the training, the smoother your transition into ownership will be. Ask for a training schedule or syllabus to see how comprehensive it is.
4 What Is the Day-to-Day Role of a Franchise Owner?
Why This Matters:
Understanding the daily responsibilities helps you decide if the franchise is the right fit for your skills, interests, and lifestyle.
What You Should Know:
Some franchises require active, hands-on management, while others allow for semi-absentee or even absentee ownership with a hired manager running daily operations. Knowing what’s expected helps prevent surprises down the road.
Key Questions to Ask:
What are the typical daily and weekly responsibilities of a franchise owner?
Is this a hands-on business, or can I hire a manager to run operations?
How much time commitment is required for success?
Are there opportunities to expand into multi-unit ownership?
🔹 Tip: If you're looking for a semi-absentee opportunity, ask if the franchise allows for manager-run operations.
5 What Are the Biggest Challenges of This Franchise?
Why This Matters:
Every business comes with challenges, and understanding them upfront helps you prepare and strategize.
What You Should Know:
Challenges vary depending on the industry but often include competition, hiring employees, marketing, and economic fluctuations. Some franchises may also have supply chain limitations or seasonal revenue cycles.
Key Questions to Ask:
What are the most common obstacles franchisees face in this industry?
What kind of competition exists, and how does this franchise stand out?
What happens if my business struggles—are there exit strategies or resale options?
🔹 Tip: Speak with current and former franchisees to get real insights into the challenges they’ve faced.
6 What Is the Reputation of the Franchise?
Why This Matters:
A strong brand reputation increases customer trust and can impact the success of your franchise location.
Key Questions to Ask:
How long has the franchise been in business?
What do current franchisees say about their experience?
Does the franchisor have any legal issues or past disputes with franchisees?
🔹 Tip: Research online reviews, ask for franchisee references, and review any history of litigation in the Franchise Disclosure Document (FDD).
7 What Are My Long-Term Growth Opportunities?
Why This Matters:
Franchising isn’t just about starting a business—it’s about building long-term success.
Key Questions to Ask:
Are there opportunities to expand and own multiple units?
What future innovations or changes are coming to the franchise system?
What kind of renewal terms does the franchise offer after my initial contract?
🔹 Tip: If you’re serious about growth, look for a franchise that offers multi-unit opportunities or scalable business models.
Next Steps: Let’s Find the Right Franchise for You
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