Frequently Asked Questions

When you purchase a franchise, you may be in your own business but you are also in an interdependent relationship with your franchisor. Based on the obligations of your franchise agreement, you can’t and shouldn’t make key decisions on your own. So you need to make sure that the franchisor is in a position to support your success and intends to do so.

 What do you need to ask before purchasing a franchise? 

Q. What’s in the disclosure document?  
A. The Federal Trade Commission requires franchisers to provide prospective franchisees with a Uniform Franchise Disclosure Document (UFDD) that contains 22 items of important information concerning the experience, business, and history of the franchisor as well as other important information. The document format is standardized so you can easily compare one franchisor offering to another.

Q. How many company-owned units and franchisees are there?  
A. You need to check the total number, sales trend, and locations relative to the area you are interested in. What is the success rate?  Will you be directly competing with other units in your area? Is the franchise system able to conveniently and regularly service your area?

Q. How much are the fees? 
A. In addition to the Initial Franchise Fee paid upfront and the ongoing royalty (percentage of gross sales or flat monthly fee) and advertising royalty, what other fees are required?

Q. How much money will I make?
A. In the past, the majority of franchisors did not give “financial performance representations.” With the revisions to the franchise law in July 2008, many more will be disclosing this information. Remember, if it is not in the UFDD, it is illegal for the franchisor or its sales representatives to give financial information outside of certain costs (see partial list below).

Q. How much do I have to invest?
A. By law, the Franchisor must give a reasonable estimate of “pre-opening costs,” but be careful because this may not represent the “total costs” of getting your business operational.

Q. What kind of support will I get?
A. Every franchisor’s support programs and policies are different so you really need to pay attention to what they promise to provide. Again, all support is listed in the UFDD including the training period and unit opening assistance. Be wary of franchisors that don’t provide significant support. You are purchasing the franchise to leverage the franchisor’s brand as well as their expertise, buying power, central services, and other opportunities to benefit from economy-of-scale.   

Q. What kind of people are you dealing with?
A.  A franchise system is like a family. There are supportive families and dysfunctional families. Determine upfront if you like each other and can work together for a long time – 5-10 years or more. Plan to visit Franchisor headquarters, meet the management team and support staff. Make sure that you ask current franchisees about their experiences with the franchisor and if they would buy again (if they had the opportunity to do it over). The franchise company provides the names and contact information of all franchisees in the system to you as part of the disclosure requirement.  

Q. Is this franchise right for me?
A. If you haven’t had previous experience in the business that your will be operating, you should ask yourself if you can and want to do the work required. This first thing to realize is that owning your own business requires you to “sell” something. If you don’t like to sell, then stay in your current job! Second, determine if the business will provide the level of income you need. Third, determine if you will be happy in the work environment and with the relationships that will be required to operate (franchisor, employees, suppliers, customers, community, etc.).