10 Questions Every Potential Franchisee Needs to Ask a Franchisor

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10 Questions Every Potential Franchisee Needs to Ask a Franchisor

Careful due diligence is required before you decide to purchase a franchise, and an important part of your due diligence is asking the franchisor the right questions; here are 10 that should be on your list:

1. Can you give me a disclosure document? Every franchisor must provide a potential franchisee with a Franchise Disclosure Document that provides key information about the franchise, and it must be provided no later than 10 business days prior to the execution of a franchise agreement.
2. How much can I reasonably expect to earn? Potential earnings are an important factor in determining the financial viability of a franchise and if it offers you the return you need for your investment.
3. What will my costs be to run the franchise? You need to know not only the upfront fee but also the ongoing franchise fees, equipment purchases, leases, etc. You also need to be aware if you will be required to update your equipment or store design.
4. Are there sourcing restrictions? Some franchisors require that you purchase all your goods and services from approved suppliers, which usually provides franchisees with a discount.
5. Does the franchisor compete with franchisees? Ask the franchisor about their online marketing and if they sell direct to consumers or plan to in the future.
6. What training and support do you provide? You need to find out exactly how much support the franchisor provides you for business operating and marketing support.
7. What marketing services do you provide? Some franchisors require franchisees to contribute to a general marketing fund; if that’s the case with the franchise you are considering, be sure to ask how they spend the money and if franchisees are provided with audited financial statements to see how the fund is used.
8. What happens if I become disabled and can’t run the business? Ask the franchisor what will happen to you and your franchise if you fall ill or are unable to run the business for some period of time.
9. What happens at the end of the agreement term? Franchise agreements usually last from 5-10 years; you need to find out exactly what can happen at the end of the agreement and what conditions there are for renewal.
10. What happens if the franchisor fails? It rarely happens, but sometimes a franchisor fails. If the business goes under, you need to know what your rights and obligations will be – i.e., can you continue to run the business under the same name?

A franchise attorney can be an invaluable asset to those searching for or starting a franchise opportunity. Contact one of the experienced Florida franchise attorneys at Jurado & Farshchian, P.L., at (305) 921-0440, or email us at info@jflawfirm.com.

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