Franchising 101

Exploring Franchise Opportunities: Get the Answers YOU Need!

by Paul Segreto

Potential franchise buyers know before making a final decision, they need to obtain information from other franchisees and also, their possible franchisors. But what information do they need to get?

Generally, I recommend using the Franchise Disclosure Document (FDD) as a guide. Read through it and ask a potential franchisor very specific questions about each item listed. It’s a can’t-miss road map. Here’s a start.

WHAT IS THE HISTORY OF THE FRANCHISE CONCEPT?

What is the founder’s vision? Who is on the executive and support teams? What experience do they bring to the table? If a franchisor hasn’t worked at a location, how has he learned about daily operations? Has he owned a business before? It’s important to understand how these individuals relate to franchisees.

HOW HIGH COULD EXPENSES GO?

All expenses should be clearly defined. It’s imperative to gain a complete understanding of the range of expenses—and why they are what they are. Inquire about assistance for everything from advertising to site selection to your grand opening.

What is the temperament of the franchise group nationally and within your market? Of course, I recommend speaking with franchisees, too. Make sure to ask them about costs, problems, profits, and trends. Discuss competition with both the franchisor and franchisees.

ASK ABOUT EXIT STRATEGIES.

At some point, you may want to exit the system or you may have to exit. If you have to exit, is there support if you’re in trouble? Ask about transfer fees and the process of selling your business. Understand the franchisor’s approval process. What happened to each franchisee listed under terminated or closed franchises on the FDD? What happened to their locations? Have they continued operation under a new franchisee or corporate? Is the location still available?

Ask yourself if you would consider a long-term relationship with this brand and its leadership.

After this process is complete and you’ve reviewed your notes, trust your gut instinct! Take your time and think things through until you’re 100 percent sure of your decision. Make sure you have all your support mechanisms in place, including friends and family. Do not kid yourself. Do not lie to yourself. And, do not justify any negatives. Being honest with yourself will help you make the right decision.

Paul Segreto is a recognized entrepreneur, franchise and small business professional. His expertise includes startups and turnarounds, strategic planning, business and franchise development, branding, social media and digital marketing with primary focus on restaurants and service-driven businesses.

Segreto founded Franchise Today podcast in 2009 and Franchising & You podcast in 2018. He is CEO of the Franchise Foundry. Contact Segreto at paul@franchisefoundry.com or visit www.franchisefoundry.com