With the profound impact of the COVID pandemic on the economy, doing your own research before investing in a franchise is more important than ever. As part of your due diligence, it’s always a good idea to research independent reviews by current franchise owners. Reviewing franchisee satisfaction reports, like the ones Franchise Business Review compiles for top brands, is a good place to start, but you’ll also want to talk to as many current franchise owners as possible, as well as the franchisor, to vet a brand before buying.
You probably already have many questions of your own, but we suggest these as a useful starting point:
COVID Impact Questions
- How has your business been impacted by COVID? Are you behind 2019, up, flat?
- How has your relationship with the franchisor/corporate team changed since COVID?
- What changes during COVID will be a part of the way you do business going forward?
- How did you revise your 2020/2021 goals based on COVID?
- What are some ways the corporate team helped you navigate the chaos during quarantine and opening back up?
- What are the safety precautions for guests and employees in your space?
- How did fellow franchisees collaborate or help each other through this spring/summer?
- How would you rate the technology/innovation of the brand (online ordering, delivery, products)?
For a complete guide to questions to ask, read 28 Franchise Questions to Ask Before You Buy.
- Did the opening of your business go according to plan?
- How effective and useful was your initial training and is the ongoing training?
- How much support does the franchisor give you on a day-to-day basis?
- If you run into problems, does the franchisor help you solve them?
- Does the franchisor visit you regularly?
- How helpful are the operations and training manuals?
- If the franchisor supplies products, do they arrive on time, and is their quality consistent?
- How long did it take to break even?
- When did you make a profit?
- What was your first-year gross revenue? What is it now?
- Has turnover and profitability been in line with what the franchisor told you it would be?
- Does the franchisor facilitate franchisees interacting with each other?
- How helpful are the other franchisees?
- What do you wish you had known going into business that you did not?
- Is there anything you would have done differently?
To help determine if the franchise you are considering is a good investment, ask the franchisor the following questions:
- How long has the franchisor been franchising?
- What is the expertise/experience of the executive team?
- Is this business financially sound? Ask if they can provide three years of audited accounts and current management accounts and have your accountant look at them.
- How many existing franchise owners are there? How many franchise owners have failed? Why did they fail?
- What data is there to prove the viability of the marketplace? Is there a long-term market for the products or services?
- Who are the main competitors and how do they compare to the franchise in terms of price, quality, delivery, and service?
- How much is the start-up investment and what does it include?
- How much will you have to pay the franchisor on an ongoing basis?
- What are the financial projections for your business?
- Is there a set territory? How does the franchisor prevent its franchisees from cannibalizing business from each other?
- How long is the term of the franchise agreement? Can you renew it?
- How long does it take to be up and running once the agreement is signed?
Buying a franchise or launching any new business can be extremely exciting and also considerably daunting. However, by asking the right questions and performing thorough due diligence you will be able to make a decision based on facts and data so that you can set forth with confidence!