Unveiling the secrets: Crucial questions to ask before buying a Franchise

Buying a franchise business is likely to be one of the biggest purchases you make in your life, so it is imperative you do plenty of due diligence before making your decision.

Unveiling the secrets: Crucial questions to ask before buying a Franchise

Ryan White, managing director of BFA member We Love Pets, talks us through the questions he wishes all potential franchisees would ask a franchisor before purchasing a franchise, focussing on return on investment, franchise stability, work life balance, support infrastructure, hands on experience, earning transparency and due diligence.

Return on Investment – When will I see a return on my investment?

It is important to understand you are not buying a job, you are investing in a business and one of the first questions you should be asking is, when will you be seeing a return on your investment? Is it three weeks, three months or three years? Naturally this answer will be different for every franchise opportunity, but the answer will help you work out how much working capital you’re going to need to finance the business in the early days.

Franchise stability – How many franchisees have joined and left the business in the last five years

If a franchise is turning over large numbers of franchisees, then there’s usually a problem. Any franchise will have ‘circumstantial’ leavers eg retirement, ill health or simply a desire to go in a different direction, plus the odd bad egg who joins then ignores the franchise model and goes off on a wild tangent (their franchise agreement will have been terminated swiftly before they could do any harm to the brand) but in the main, you want to join a franchise which is recruiting consistently and losing few at renewal time (usually every five years).

Work-life balance – How many hours a week will I have to put in personally for the business to be successful?

This is a very fair question. At the end of the day, you want to know how hard you are going to have to work to build a successful business. As I say to my franchisees, you aren’t buying a job, you are investing in your own business and like any new business, you are going to have to spend a lot of time getting it off the ground.  Very few franchisors furnish their franchisees with leads so be prepared to put in some hard graft to begin with. You won’t hit the ground running, it will take time to build up your client base, but if you follow the model and accept the support given, you’ll get there. 

Support infrastructure – How many support staff do you have at headquarters? 

The concept of franchising is built around the support franchisors offer their franchisees, so without the right number of staff how can they fulfil that obligation? 

Hands on experience – Has anyone at head office been directly involved in running a branch in the last 5 years?

It’s easy for franchisors to get removed from the day to day running of a branch – so it is desirable that someone in head office, not necessarily the franchisor, has worked in, or run their own branch of the franchise within the last five years, so they can truly understand the position their franchisees are in.

Earning Transparency – What do your top, middle and bottom franchisees earn?

In the US, by law, a franchisor must reveal this information to potential franchisees. It’s not law here but I think all franchisors should be 100% transparent about their franchisees’ earnings and I’d strongly advise prospective franchisees to ask this question at interview. If the franchisor isn’t willing to share this information – ask yourself why not?

Due diligence – Can I call or contact every single one of your franchisees?

The answer to this must always be yes, unless there are genuine reasons eg ill health and they don’t want their franchisee bothered while they are unwell, but all being well, they absolutely should give you permission to contact them all and you should ring as many as you can. 

Buying a franchise can be a life changing and enhancing experience, as long as you ask the right questions and of course, consult a BFA approved franchise specialist solicitor before signing the franchise agreement.

For more information about buying a franchise visit: https://www.thebfa.org/investing-in-a-franchise-advice/ 

Ryan White
Ryan White