Everybody wants to know “How much money am I going to make in this business?” That makes sense to me. If I was buying a franchise, I’d want to have a pretty good idea how much money I could expect to make?
We’re taught that one of the advantages of a franchise is that you can learn all about it before you buy. So what else should you want to learn?
We give our clients two lists of questions: One to ask franchisors, and one to ask franchisees. These are just conversation starters though. Once you get into a conversation, you’ll start to think of all sorts of topics.
Some of the things to ask the franchise companies are about the franchising history: How long have they been franchising, and how many franchisees do they have?
One important question is about how many franchises have closed in recent years. If that is a high number, it is a warning sign – something you at least want to learn more about.
And don’t forget to evaluate the franchisor’s health, too. They are required to give you a copy of their financial statements – so look at those and assess their likelihood of sustainability.
You also want to ask about the training they provide. How long is it? What does it cover? What kind of follow up help do they provide? (Because you are certain to still need support the formal training process.)
You’ll also want to ask about the investment. Be sure to find out both what the initial investment is, and what you’ll need in working capital after you open for business.
Whatever sort of business your franchise is in, you’re bound to have competition. And, the better the business idea, the more competition you’re likely to have. Be sure to learn about the competition. Who are the major players? What advantages will you have in competing with them? Are there any areas you might have a competitive disadvantage?
That’s a starting point for your conversations with the franchisor. What about the franchisees? What can you find out from them?
A lot of your questions will cover the same areas as the questions you asked the franchisors. You’ll want to ask the franchisees about the training and support they received. Most importantly, ask about the quality. How good was the training? How strong is the support? When you need help, are you able to get it? Is the help good enough to actually be of help?
Ask about their costs. You’ve already asked the franchisor how much your total investment should be. Now ask the franchisees what their actual investment was. Compare this to what the franchisor told you.
Ask what the biggest challenges are in this business. Every business has some headaches. Find out what those are likely to be in your new franchise.
If the franchisee is successful, ask them what makes them successful. Ask what the essential steps are to becoming successful.
You can often learn more from someone who is struggling in their business. Ask those franchisees what issues they are finding. By the time you’re making these calls you’ve probably started to learn what the most important steps to success are. Is the franchisee taking these steps? If this business requires sales calls or advertising or hiring employees – is the franchisee doing these things? That will tell you a lot about what you need to do in order to succeed.
This article opened with the question “How much money am I going to make in this business?” Now is your chance to find out. Ask the franchisees how much you can expect to make if you work hard and work smart. They’ll tell you, and you’ll gain an understanding of what this business is like in the real world.
Then ask what I believe is the most valuable question to ask: If you had to do it all over again, would you invest in this franchise?
You really can find out all about a franchise before you buy. How? By asking questions. The best question to ask? That’s easy: The one you want the answer to.