Questions to Ask Before Investing into a Franchise

Don’t Be Caught Off Guard

When the decision is made to buy into a franchise business, it is almost inevitable that there will be a few bumps along the way, especially if you are new to franchises and purchasing into existing business structures. One of the most frustrating occurrences for many people buying franchises is getting to the end where they are ready to sign the dotted line, only to find out that there is a significant deal breaker and the need to search for a new opportunity. Ask these questions when searching for the best franchise opportunity to help you sort through the best opportunities for your personal and professional needs:

  1. How Much? One of the most important considerations when investing into a franchise opportunity is how much investment will be required on your part. Some franchise opportunities require an up-front capital investment as well as a minimum personal net worth requirement; so, make sure that you investigate both requirements to ensure that you can satisfy both before proceeding. You will want to discover both verbally and in writing the amounts required to obtain the franchise opportunity, any costs associated with the franchise that are not required in the beginning steps and if there are any ongoing costs to maintain the franchise.
  2. Success and Failure Rates When investing into any business, and in particular a franchise opportunity, you will want to see and fully understand both the risks and rewards that are involved. Ask to see the upside opportunity and the failure rates so that you can accurately assess the risk involved with the opportunity and your associated risk tolerance.
  3. Your Resume- Does it Match? Each franchise opportunity will be best suitable for specific skill sets and characteristics of the owner operators. Ask the franchise leaders what specific skill sets they are looking for or what skill sets the top people in the organization possess. Compare those skill sets to your own to determine whether the franchise opportunity is a good match for you or not. Don’t be afraid to walk away from an opportunity if it is not a match for you; there are plenty of opportunities in a variety of industries that will be suitable for the skills that you have to offer.
  4. How Far Can You Go? Franchises will often have a limited territory in which you can expand or market within. While this may be of no significance for many opportunities, it is important to ask and fully understand before you invest. For example, you may thrive in your opportunity and want to expand into other locations, only to find out that the area in which you are in is not available. Be sure to ask what the opportunity both today and tomorrow is so that you can make the most informed investment decision possible.
  5. Training and Support One of the benefits of a franchise opportunity is often the support provided both in the initial start up phases and throughout the operation. Ask what support is provided, how accessible it is and if there are any costs associated before you invest.

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