Buying into a franchise is an exciting endeavor for the entrepreneurial-minded. Excitement aside, opening a franchise requires research and checking off a list of questions. Whether you’re looking to join a company of restaurants, package deliverers, or florists, the list of questions are probably the same. A few quick definitions: a franchisor grants the right to own a franchise, a franchisee pays for the right to own a franchise.
Here are seven questions you should ask before becoming a franchisee.
1. Am I a Good Fit for Franchising?
This question is obvious, but iterations of it may go ignored while deciding to join a franchise system. The following questions will help guide the answer to this questions, but right off the bat, you can consider whether you make a good candidate. Are you a self-starter? Do you like the idea of being a part of an existing brand? Are you in the right financial position? Are you at the right age? The last one can be answered in many ways. Franchisees come in all ages: some are recently retired or laid off from a major national corporation, some are fresh out of college, and some have worked the cash register for a company for years and are ready to operate their own business under the banner or a franchisor.
2. What are My Interests, and Is There a Franchise Out There for Me?
Franchising has given multiple generations the ability to channel their interests into a business with the support of an existing brand and business model. I think we all know more than one person who has a hardware store, a coffee shop, or a sandwich shop that is a franchise. Ace Hardware, Tim Hortons, and Jimmy John’s locations are found in most cities and towns, and are often owned by locals–your neighbors. So why not you? Name an interest and it seems there are several franchisors looking to do business with you. If not, there’s probably a business tycoon game waiting for you in an app store.
3. How Autonomous Can I Be? Or, How Autonomous Do I Want to Be?
Have you dreamed of opening a coffee shop with gingham curtains from home and vases bursting with daisies? Or, would you rather have seasonal window clings and coffee cup sleeves that connect your shop to a brand that supports hundreds of other shops? There’s a spectrum of how much a franchisor dictates to a franchisee; however, the plans are usually specific and in the interest of the brand. For many, that system might be preferable because instead of spending time and energy on branding decisions, you can get to building a strong team and opening more quickly.
4. What Kind of Investment am I Looking to Make?
This speaks to the previous question because depending on the type of franchise – the type of investment you choose – you’ll have varied decisions to make. For those who know little about franchising, the most obvious form is the one where a location looks exactly like another location. A Burger King opened in Burlington, Vermont, in 2016 will look very much like a Burger King opened in Austin, Texas, in 2016. This is because the type of franchise Burger King offers gives the franchisee a brand and the trademarks that go with it for the cost of royalties. Conversely, some franchisors lend their brand name and a business model, but the costs are different because the franchisee is most likely buying product from them and reselling it. Think of a gas station franchise where the products vary slightly from other gas stations of the same name–this is because the franchisee is choosing what to sell in their store but still exists under the brand name of their franchisor.
Switching from introspective questions, here are a few questions to ask of your potential franchisor:
5. Are Existing Franchisees Happy with Their Franchisors?
Every company with franchising has hired a team of people who are responsible for catching your eye. And there is a website and a brochure dedicated to making sure you add So-And-So Company to your list of potential franchisors. But more telling than their franchise marketing are the testimonies of the franchisees who came before you. The franchise website will include a few of the good ones, of course, but searching Google for testimonies from others will speak volumes as to the true nature of experiences with the companies you’re considering. Considering the aforementioned notion that many of our neighbors are franchisees, it’s a safe bet that there are myriad franchisors that are a sound investment and are great to work with.
6. Are All Locations Franchised?
Knowing whether or not all locations are franchised will speak to the business models of the company. Some brands are largely franchise, like McDonald’s which is over 75% independently owned. Panda Express, however, is less than 3% franchise owned. Why would this matter? Well, despite holding their brand and service in high priority, franchise granting businesses usually put a lot of energy and investment into making sure their franchisees are content and receiving a satisfying return on investment. It cannot be assumed that all low-percentage franchise businesses do not consider it a priority, but it is absolutely worth discovering how much focus they have franchise growth.
7. What Does the ‘Continued Support’ Look Like?
Again, this question has to do with how autonomous you seek to be. But, almost every franchisor commits to continued support. So, what does that look like? What support have you potential franchise-mates received? Is it different now than it was ten, twenty years ago? Support can be seen in more than branding, by the way. It may come in the form of mentoring, inclusion in company decisions, annual conferences or meetups that mesh franchisees with other company employees, etc. Take a look at the continued support offerings of two very different franchises: Burger King and Supercuts.
Remember most franchising companies have marketing designed to grab your interest and trust. Be sure to do some of your own research and to answer the above questions to understand what you’re heading into. Now that you have questions to ground your research, you can start your pursuit of becoming a franchisee in earnest.