Once you’ve done your homework research, you might wish to interview a potential franchisor. You should have a list of questions that popped up as you did your investigation. Focus on the areas that will help you determine the strength of the franchise.
- What are the pretax net profits of existing operations? Compare them against the earnings statement or pro forma that the franchisor has already supplied you.
- What kind of support can I expect? Learn what is included in the training program, field assistance, store design, facility construction, site selection, and feasibility studies.
- Is working capital required after the initial investment? You want to know if there will be additional working capital required after the initial fee and investment. If so, how much?
- How is supply arranged? How does the franchisor supply product to the business? Ask for a current price sheet.
- What are the territorial restrictions and protections?
- How many franchises have been sold in the state I’m operating in? Ask the number of franchises sold to investors in the state you plan to be in during the last 12 months, and how many have opened a franchised business in that time.
- Does the company have plans for further expansion in this state? Have any locations been identified where the company plans to develop?
- Investigation of records. If you are purchasing a resale franchise, ask to see the operating books and records for the past two years.
- Post-opening support. What support is offered by the franchisor your franchise has begun operating?
- Have any franchisees been terminated? If they have, ask for the details. Specifically, have any franchisees failed or gone bankrupt?
- Is financing available from the franchisor? What kind, if any?
- Are there any lawsuits pending? Also, ask them to elaborate on any past judgments.
- How are disputes settled between the franchisor and franchisees?
- Does the franchisor help with site selection?
Remember, the point of this interview is to give you the very clearest picture of a potential business. You want to know about problems before investing in the franchise but you don’t want to settle for just any franchise.
Don’t be afraid to ask questions or fear that you’ll look stupid if you do. Not many people completely understand the FDD and the best way to learn is to ask.
Be wary of franchisors who don’t really answer your questions. Researching the right franchise is important to make an informed decision. Using franchise consultants will help you navigate through this decision process. If you are thinking about a franchise opportunity, talk to your local FranNet consultant and receive your free Personal Franchise Assessment to get matched to the right franchise for your business personality.