Buying a franchise can be intimidating and it's important to ask the right questions before you make one of the most important decisions you'll ever make. I've compiled a list of frequently asked questions when buying a franchise which I hope will help you understand our world.
Most importantly, there are no silly questions. Buying a franchise is a complex process and the answers to many of these depend on several factors which is why using a franchise advisor is a wise choice. Our services don't cost the buyer but not using our services might lead to costly mistakes. Here are a few more common questions about my services.
- What do I have to pay to the franchisor? There are a lot of wonderful things about franchising, but they do come at a cost. The franchisor will almost always charge you a one-time advance payment (called the franchise fee), plus a share of your business income (usually called the royalty). Sometimes the advance payment is called a set-up fee, a training fee, an onboarding fee or a territory fee, but the essence is that you pay it upfront, when you first join the franchise. The amount will depend upon the franchisor, and it could be literally anything; however, it just so happens that the franchise fee we encounter most often is about $50,000. Similarly, the royalty can go by many different names and can be any amount, but the most common number is 6-8% of revenue. In addition, most franchises have some other ongoing fees such as for advertising support or software and other technology. But the main two are the upfront franchise fee plus the ongoing royalty.?
- How much will a franchise consultant charge for their services? This is an easy one. Most franchise consultants charge their clients zero. The reason for this is that they are paid out of the franchisor’s marketing budget, in exchange for introducing highly qualified candidates. My process is designed to find franchise opportunities that are highly suitable for you – but think about it, if those franchises are perfect for you, then you are probably right for them too. It’s genuinely a win-win.
- How do I know if a franchise is right for me? Starting a business from scratch is always a matter of hope and guesswork, but with a franchise you can get a solid, well-informed understanding of the opportunity before you jump in. This is because the essence of franchising is replication of a proven business model. There will still be unknowns if you go ahead with the business, and the unexpected will still crop up; but they are reduced to a minimum, compared with the host of unknowns when you are launching a new venture on your own. Ask your franchisor to describe their “discovery process” early on. Normally you will find that it includes at least the following steps: a presentation of the business model with a chance for extended Q&A, then a copy of the FDD (a detailed regulatory disclosure document) and a chance to review that, then a chance to interview existing franchisees about their experience with the business, and an opportunity to spend a few hours with the key players in the company to get to know them and ask them any remaining questions. If you maximize this process, you should find out how others have fared when launching essentially the same business that you are contemplating. When you write your business plan, you can base it on the real experience of other people using the same business model that you are thinking of adopting for yourself.
- Will I be successful if I join a franchise? Some franchises have a higher average 3-year survival rate than others, but no matter what business you are in, you can be sure there will be crises and bad turns of luck. Over time, there should be lucky breaks to balance that as well. The question becomes, how well will you personally be able to deal with the specific mix of issues that come your way? You should launch any business with that in mind – it’s not about choosing a foolproof business model. It’s much more about adapting to circumstances once you are in business for yourself. Yes, with the support of the franchise, but also by using your own best judgment and being resourceful, diligent and persistent. This is one reason why it’s so important to understand the day-to-day responsibilities that you will have in the new venture – are they duties that you will be well-suited to performing? Will you enjoy them and therefore perform at your best??
- Could you send me a list of the franchises that you represent? Nope. There are far too many for that to be an easy thing to do, and the list of company names wouldn’t help you anyway. Rather than scanning a list, looking for familiar names or googling the ones that randomly strike your fancy, you will be much better off talking to me about your needs and preferences, and then looking at the companies I pre-select for you. If I somehow manage to strike out, completely misunderstanding what might be suitable for you, you can explain what I got wrong. It doesn’t happen often, but it has happened before, and I’ll be happy to go back to the drawing-board on your behalf, so that the next batch of opportunities I show you is more suitable. Even in that case, you’ll still be a lot better off than just perusing a list of companies on your own.
- How do I get started exploring franchise opportunities? Set up a phone conversation with me. I’ll be more than happy to talk to you, give you an overview of the possibilities, answer your questions, and potentially start looking at specific opportunities for you. There is no formal commitment on your part, and no fee.
Would you like to learn more? Who do you know who would like to get started on the process of finding the right franchise? Please ask them to schedule a call with me here:
