Before you sign any agreements or pay fees to your potential franchisor, you should gather as much information as possible about the franchise. While you can certainly get a lot of information from the parent company through the Franchise Disclosure Document, there are some details you’ll likely need to do some digging for.
By speaking to existing franchisees, you can gain realistic insights into your potential profits, unexpected costs, day-to-day challenges, and responsibilities. You can also find out whether franchisees are satisfied with their franchisors.
In this guide, I’ve put together more than 30 of the most crucial questions to ask existing franchisees before you invest.
General Questions
The existing franchisees will be able to provide some of the best insights into what it’s like to run a franchise in the company. The first questions you should ask when speaking with current franchisees should revolve around how satisfied they are with the franchisor and the franchise business model. Here are some good questions to get you started:
1. What do you like least and most about franchising?
If you’re new to franchising, you should make sure you fully understand the overall pros and cons of the business model. Ask franchisees what they like the most about running the franchise and what they like the least. This can give you some valuable information to help you decide whether or not the business is for you.
2. What’s the best and worst thing about being a franchisee?
Being a franchisee is quite different than running a business entirely independently. An existing franchisee can explain to you in-depth what their day-to-day looks like and help you envision yourself in their shoes.
3. What was your background before you became a franchisee?
Finding out why somebody invested in a franchise and what skills they brought to the table can help you determine whether it’s the correct step forward for you. For example, if you and the current franchisee have different professional backgrounds, it’s worth considering how their experience influenced their success.
4. How long have you been running your franchise?
If a franchisee has been running their branch for several years, it’s a good sign that they’re satisfied with their business and make a decent income.
5. Did you consider other brands before investing in this one?
Franchisees may have very specific reasons for investing in a particular brand over a different one, and these insights can be invaluable to your market research.
6. If you could start again, would you invest in the same brand?
Naturally, some people may focus more on the positives than the negatives when discussing their livelihood. Asking this question gives you a look at the true level of satisfaction for the franchisee.
7. How do you plan to grow within the franchise system?
It’s worth thinking about how you might be able to develop your franchise or investment strategy a few years down the line. Do existing franchisees tend to remain where they are, or do they tend to branch out?
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Questions About Challenges They Face
Compared to other business models, franchising can be more straightforward. For example, instead of building brand recognition from scratch, you can capitalize on an existing brand and utilize a proven business model. However, as with all types of investing, franchising still has challenges. Discussing these challenges with existing franchisees is a great way to shed light on which challenges are worth facing and which may be red flags.
8. What challenges have you faced while working with the franchisor?
Obviously, you’ll want to know exactly what challenges the franchisee has experienced. A successful business relationship should usually run smoothly, but challenges are bound to arise. Does the franchisor frequently change its operational guidelines? Do existing franchisees feel they are limited in the decision-making process?
9. Have you ever had any conflicts with your franchisor, and were they resolved to your satisfaction?
Minor conflicts are relatively common in the franchising industry, but reputable franchisors have procedures for resolving them and ensuring they consider their franchisees’ concerns. You should ask the franchisee about any conflicts that they’ve experienced. It could be a red flag if the franchisor doesn’t respond to conflict professionally.
10. Has the franchisor ever made systemic changes that have impacted your ability to do business?
Adapting to changing market conditions is a huge aspect of business success. However, it’s worth finding out how the franchisor helps ease transitions when changes are made. For example, if the franchisor introduces new technology to the entire franchise system, you’ll want to know whether franchisees received financial assistance or training to implement it effectively.
11. How do you see the industry and the franchise evolving?
Market trends are constantly shifting, and an industry thriving last year may not be doing so well today. The franchisees you speak with may have entered franchising at a time when the industry and franchises were booming. Do they expect to see similar growth in the future? If they had to start again today, would they invest in the same franchise?
Questions About the Franchisor
While you should certainly also prepare a list of questions to ask the franchisor, it’s also a good idea to gain an outside perspective of the franchisor by speaking with franchisees. After all, after signing the franchise agreement, you may enter into a business relationship for years or even decades.
12. What is your relationship like with the franchisor?
You might be a business partner of your franchisor for years to come, so it’s reasonable to want to know what to expect from the relationship overall.
13. Did you receive adequate initial training?
Your franchisor has a duty to provide you with at least a foundational level of training to run a franchise successfully. Find out whether this training is really adequate or whether you’ll need to invest in additional resources.
14. Does the franchisor respond to your queries efficiently?
Running a franchise presents many challenges, which means questions are bound to arise. Will your franchisor swiftly assist you or leave you in the lurch? The last thing you want is to feel stranded when dealing with a critical issue, such as resolving supply chain disruptions, navigating a new marketing initiative, or addressing an unexpected operational challenge.
15. How satisfied are you with the ongoing support provided by the franchisor?
You can gain insights into your franchisor’s obligations to you as a franchisee by reading documents such as the Franchise Disclosure Document. However, if you want to determine whether the franchisor meets its obligations in practice, you’re better off asking an existing franchisee.
16. How are conflicts and disagreements dealt with?
You need to know that should conflicts or disagreements arise, procedures are in place to reach amicable solutions. Ask existing franchisees whether these procedures feel fair.
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Questions About the Franchise Operations
Speaking with franchisees allows you to gauge whether the challenges, workload, and routines of running a franchise align with your goals, lifestyle, and expertise. So, I recommend asking the following questions:
17. What does a typical workday look like for you?
Purchasing a franchise can be exciting, but once you’re up and running, you need to know what your typical daily routine might look like. Will you be able to strike a healthy work-life balance? Are there any day-to-day tasks you’ll be responsible for that you might not have thought about?
18. Do you have any say in the decision-making process?
Running a franchise for an existing and respected brand generally means you’ll have to adhere to strict operational guidelines so that the parent brand can maintain its reputation. It simply comes with the territory. However, you may need to adapt things slightly depending on the unique needs of your business and locality. Find out how much leeway you have regarding decision-making from the direct experiences of existing franchisees.
19. What do you find most challenging about operating a franchise?
Existing franchisees can give you a broader understanding of some of the unexpected challenges you’ll face when running your franchise. This may include managing cash flow, keeping up with franchisor-mandated changes, marketing the franchise, and meeting KPIs.
20. Does the franchisor encourage open communication between franchisees?
It’s a good sign if the franchisor has systems in place to help franchisees communicate and collaborate. Signs of a supportive franchise network include regular regional meetings, online forums, and franchisee mentorship programs.
Questions About Profit and Revenue
Naturally, you need to gain as solid an understanding as possible of the potential earnings and expenses involved with running a franchise. And the best source for such information is existing franchisees. Here are some of the most essential questions to ask regarding profit and revenue:
21. How long did it take before your franchise became profitable?
The average franchise can generally turn a profit in around 1 to 2 years. Asking this question lets you determine whether you have enough capital to sustain your business until it starts making a profit.
22. Will I be able to sustain my usual income?
Instead of asking how much revenue a franchisee generates, you can let them know your profit expectations to determine if you are being realistic.
23. Were the franchisor’s financial projections accurate?
While it’s important to analyze the franchisor’s projections, it’s equally crucial to scrutinize them. Speaking with existing franchisees about their experiences helps you know what to expect.
24. How consistently do you make a profit, and how have your margins evolved?
Does the franchisee generate a healthy profit each month or every quarter? Have they managed to increase their profit margins since opening, and if so, by how much?
Questions About Costs
It can cost hundreds of thousands or even millions of dollars to buy a franchise, which doesn’t include your ongoing royalty fees or ongoing expenses. Before entering into any agreements, make sure you have a comprehensive understanding of the costs involved by asking these questions:
26. Did you face any unexpected costs when starting out?
It’s crucial to have enough working capital set aside for unexpected costs. Finding out what those unexpected costs are likely to be can help you decide how much capital you need.
27. Do you think you pay more for supplies and inventory than you should?
As part of your franchise agreement, you may only be allowed to source supplies and inventory from the franchisor itself or a designated supplier. Existing franchisees can tell you whether the prices are fair.
28. Do you feel your contributions to the advertising fund are fair?
As a franchisee, you’ll likely be required to contribute to a national marketing fund, so it’s worth finding out whether existing franchisees feel they benefit from their contributions.
29. How was the franchise fee affected when it came to renewal?
If a franchisee has already completed a term and renewed their agreement, you might be able to find out what costs were involved in the process.
30. What is your most significant expense?
Discovering which expenses have the biggest impact on a franchisee’s revenue can help you decide whether it is the right investment for you.
31. Did you use the franchisor’s in-house financing?
Funding a new franchise is one of the biggest hurdles that every franchisee will have to face. Many franchisors offer in-house financing options from reputable loan providers. Ask the existing franchisee if they used this option and, if they did, what their experience was with obtaining a loan.
Advertising and Marketing Questions
The success of the franchisor’s brand presence and advertising strategies will have a direct impact on your ability to drive sales and attract customers. Therefore, I urge you to ask the following questions to gain some insider info on the effectiveness of the brand’s marketing efforts.
32. How effective are the franchisor’s advertising and marketing efforts?
In many cases, you’ll be required to contribute to your brand’s national advertising fund. Find out from existing franchisees whether you’re likely to see a return on your contributions.
33. Do you have any say when it comes to local marketing?
Your franchisor may be flexible in some aspects of local marketing. Franchisees can let you know what kind of say you might have when it comes to attracting local customers that the parent brand’s adverts might not reach or resonate with.
34. How strong is the franchise’s brand recognition in your area?
Existing franchisees can explain to you the popularity of both the overall franchise brand and break down any local competitors.
Why Should You Ask Existing Franchisees Questions?
Asking existing franchisees questions before investing in a franchise is one final step in the franchise purchase process that you simply must not miss. While the franchisor will provide plenty of information regarding their performance, business model, and expectations, it’s important to understand that they are “selling you” on the franchise. So, they’ll likely present you with best-case scenarios. Speaking with existing franchisees gives you access to some more “candid” insights. They’re much more likely to tell you about the good, bad, and the ugly when it comes to franchising without leaving out any not-so-glamorous details.
It’s also essential to understand your relationship with the franchisor before you jump into bed with them, and there’s no better source for this information than existing franchisees.
The successes, struggles, conflicts, and accomplishments of an existing franchisee will help you decide whether this investment is right for you. Franchisees can tell you about challenges franchisors might neglect to mention and give you some final info to help you make the right decision. To help you make the best data-driven decisions, check out Franzy, the ultimate franchising platform that makes this research process a breeze by providing comprehensive franchise data, expert insights, and real-world experiences from current franchisees.
