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Questions to Ask a Franchisor Before You Sign

There are many steps associated with starting a franchise. And at every step, you need to prod and ask questions. In the very beginning, you have to ask yourself why you want to join the franchise industry. Then, while looking at different franchise opportunities, you ask, “Which one is best suited for me” or “can I afford this franchise business for sale offer in terms of money/time commitment”. All these questions will help you to arrive at a particular franchise concept, which you then investigate further. Lastly, comes the time to sign the deal and buy a franchise. But do you stop asking questions at this stage? Of course not; on the contrary, you should ask some more questions before signing any franchise agreement.

“What help am I going to get to set up the business?”

Apart from real estate and lease negotiation assistance, there are various other areas where a franchisor can help the franchisee. It may include site designing help as well as support in getting required licenses. Remember, the more help the franchisor gives you in this department, the faster you are going to set up your business. And the quicker you set up your business, the sooner you are going to get your money back!

“What are your growth plans?”

A franchisee can’t reach greater heights unless the franchisor has a definitive growth plan. The growth plan of the franchisor will tell the franchisee how much serious the franchisor is regarding the franchise system. If it plans to grow at a breakneck speed without bothering about its capability, then the franchisor is more into selling units than developing them! On the other hand, slow growth ensures more brand-recognition. So, there should be a proper balance in the growth plan of the franchisor to help you make profit as a franchisee.

“At what terms do we end this agreement? Can I automatically renew my franchise agreement after the term period is over?”

It’s very funny to talk exit before even starting the franchise; but you should always know the exit policies. Many franchisors have very strict exit policies and you can’t sell the units without prior approval of the franchisor. And as for renewal after ten years (the most common franchise term-period), in most cases, it is not automatic but a re-negotiable process.

What questions did we miss? Join in the conversation.