It’s important to do your research on the franchisor before you buy into a franchise business. But where do you start?
Legalite Principal Lawyer Marianne Marchesi offers some excellent tips, highlighting ten key questions to ask, during her presentation at the Australian Franchise Marketplace.
Did you catch her presentation?
Here are three of those questions:
- When can I see a return on investment?
This question is key as it will help you assess if you have sufficient start-up capital to get the business up and running to a point of not only profitability but also to a point where you achieve an acceptable level of return on investment.
Some businesses might reach a point where you’re making a profit week on week, but is that profit likely to grow to a point where you’re making a return on the initial start-up costs and not just the on-going costs of running a business. After all most franchise agreements have an initial term of five years so you really want to see acceptable returns within that initial term.
2. What do your best-performing franchisees have in common?
While you’ll often find lists of questions to ask the franchisor this is not a question that often comes up, but provides really key insights into the drivers of success for that particular franchise business. If it’s purely based on the hours they work you need to ask yourself if you’re willing to put in the same amount of time.
Often you will find there are several contributing factors. The franchisor should be able to answer this question off the cuff quite easily, and if they can’t you’d want to dig a little further into what are the key drivers of the business and the levels of support provided by the franchisor or head office.
3. How do you resolve disagreements with franchisees?
While we all like to imagine our relationship with the franchisor of the business will be all sunshine and roses, there is a reason franchising is often likened to a marriage. It’s almost inevitable that at some point some degree of conflict will arise.
How you deal with this conflict makes all the difference. By asking this question you’ll know what to expect in advance if any issues arise and can decide if you’re comfortable with that approach. This can be a big game-changer if tempers start to rise.
The above is only one of several tips and pieces of advice offered by our content experts during their session at the Australian Franchise Marketplace in September 2020.
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