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Questions to Ask Before Buying a Franchise

Buying a franchise is a major step towards investing in your future. You want to be absolutely certain that the franchise you buy into is one you can afford, continue to reinvest your profits in, and still make a profit from. If you don’t make enough to do all of the above, you won’t have enough for everyday living expenses, and thus your investment starts diving for the bottom.

Before you plunge headlong into investing in your chosen franchise, consider first a series of important questions that must be asked.

1. Do you have not only the capital to invest in the franchise but enough to keep both your business and your personal life going for at least six months?

A. Consider the answer to this carefully. You should have a business plan and a monthly budget drawn up and side by side for your investment and business expenses and your standard living expenses. The total sum of both worksheets is what you need to keep afloat every month. Additional money is a good idea just in case something unpredictable happens, like a stove or clothing racks need to be replaced. If you do not have that amount x6 for six months, you’re likely to run into more trouble than you can handle.

2. What do other franchisees say about this particular franchisor?

A. Are other investors happy with their investment? Do they have nothing but good things to say, or are there some negative comments that should worry you? If you can’t find the answers that don’t give you peace of mind and assurance that this particular franchise is right for you, you shouldn’t buy into this one and should move on to your second choice (or possibly your third).

3. Why have you turned down other franchisees?

A. Lack of startup or investment capital, not enough capital to keep the franchise going, lack of experience running a franchise, business bankruptcy, and poor management skills are all reasons you could be turned away from owning your own franchise. Franchisors like the plucky and courageous, but not at the expense of their company looking foolish or mismanaged.

4. As the franchise grows, is there enough training resources available to grow with the franchise?

A. Are you going to be struggling with what to do next because there is nothing and no one to coach you on how to proceed? What about training for your newly hired employees? How can they learn the ropes if you haven’t and can’t? Despite the analogy, the blind can lead the blind, but in business that is a horrid way to go about learning anything.

5. What’s the bottom line on investing in this franchise versus any other?

A. The bottom fiscal line says ten million, but there’s no bottom line on your time. Someone in the business already knows that you will probably invest eighty hours or more a week into the franchise in the first year alone. That’s never on paper when you buy in, so you have to ask. Your money is not the only commitment you make.

6. When there’s problems or conflicts with or within the franchise, how are they resolved?

A. Going up the food chain you don’t want to find out that a problem you have with merchandise you ordered or a company policy that’s giving you a headache is going to be ignored. You want answers, not confrontation. You want problem resolution in a timely fashion, not excess stress for a month or more. Get the answers and get the facts before you invest and save your time and money for something better.

7. What is the average expected profit margin?

A. This should be the last question you ask, not the first. Demographics across the franchise reflect the best and worst, but profit depends on a lot of factors, and impressive dollar signs only means that others in the franchise have the cream of the crop in most of those factors.

Opening up a franchise take time and should be completely researched before you sign the contract. FranchiseClique.com offers entrepreneurs resources to find the perfect franchise. We offer an easy to use comprehensive directory that lists hundreds of the best franchise opportunities and businesses for sale. We’ve got all the information you need to identify which business is right for you.

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2 Responses to “Questions to Ask Before Buying a Franchise”

  • Great tips, the lack of startup or investment capital is something which tends to kill a great deal of businesses regardless if they are franchises or not. It really is important to have enough capital to get through the first year of operation without depending on the business for that money. I’ve also noticed that people forget to factor in the notion of paying themselves as well.

  • Really great insight here. Thanks for sharing. I’ve been really concerned about the profit margin issue!

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