10 Questions to Ask a Franchisor During a Franchise Interview
You have decided to take the leap and become a business owner through franchising. There is a great deal of information out there to learn. You want to make sure you’ve thought through everything that could really make or break your ability to succeed as a franchisee. You want to ensure a good fit for you and your goals. If you’re wondering what questions to ask potential franchisors during the franchise interview, here are the top 10 questions worth discussing.
- How Did the Franchise Begin?
You want to know what the motivation or inspiration was for the franchisor to start this business. Experts say this should be your first question. It’s also important to learn about the franchisor’s team of company representatives, their skill sets and qualifications, and discuss the company’s priorities and goals. From there, you can glean whether your passions align. Experience is important, but as a franchisee you also need to identify with the foundation of this business.
- What Are Your Criteria for Choosing Franchisees?
Most franchisors are interested in finding franchisees with a certain set of qualifications that will fit nicely with the brand. It’s crucial to know this prior to making a commitment. It must be a win-win for both parties. Your skill set and personality need to be a match with the company culture. Take it one step further to discover their expectations of franchisees, and make sure to get an understanding of your obligations if you open a franchise.
- How Much Do I Have to Invest to Open my Business?
This is a business investment, and you need to decide exactly how much liquid capital you can afford to invest. You need to set a budget and determine if this franchise fits in the parameters. Depending on the brand, initial investments could be as low as a few thousand dollars or run into the millions. Franchisors should be very transparent with these numbers.
Brands like MassageLuXe include the initial costs to open a franchise on their website. You can also find detailed financial information in the Financial Disclosure Document (FDD), which is made available to potential franchisees upon request.
- How Much Liquid Capital Do I Need to Open the Franchise?
Typically, candidates will need 10 to 30 percent of the estimated initial investment in liquidity to take advantage of the many popular funding strategies available. Your personal liquidity includes bank accounts and investments in brokerage accounts. One of the many tools that people are currently using is severance packages to secure franchise financing, as severance packages often include severance pay, unused vacation, sick pay, deferred compensation, and company stock and stock options that can be cashed in.
There’s also option to use equity in your home to secure franchising if it does not put your family’s financial security at risk. If you are planning on using retirement funds, there is an option to do a 401(k) or traditional IRA rollover, also called Rollovers as Business Startups (ROBS). The ROBS rollover enables aspiring business owners to tap into your own retirement monies to fund your businesses, without paying taxes or early-withdrawal penalties.
- What Are the Ongoing Fees?
There are ongoing fees paid to the franchisor like royalties and advertising. Make sure to understand the amount your obligated to pay to use the brand, and how often your expected to make the payments.
Franchisors are typically very transparent with this information. MassageLuXe includes a breakdown of franchising fees on its FAQs page for potential franchisees.
- How Strong Are the Franchise Company’s Finances?
You need to see the franchisor’s recent financial statements, which is Item 21 of the FDD. You may wish to review this with a franchising attorney or expert. If the franchisor is financially healthy and showing growth, it’s a good sign.
- How Many Other Locations Are There?
To determine the size of the franchise, you’ll need to ask the number of locations they have. Do they have franchisees who have multiple locations? Have other franchisees enjoyed long term success? Check the success rate of their franchisees. If any locations have failed, find out why. It may also be helpful to call current franchisees and ask about their experience with the brand.
- How Much Money Can I Make?
There is no guarantee that you will make what other franchisees earn. You need realistic expectations of your earnings in the first year and following years, based on the averages of current franchisees. This is simply a ballpark figure to determine income potential. You are not looking for unit gross sales; you are looking for income potential.
Many franchisors include profit and loss performance in their FDD under Item 19. MassageLuXe has an Item 19 that allows you to see income performance in spas.
- What Sets Your Company Apart?
Here’s where you find out where the franchise stands next to the competition. You are looking for successes and failures, or at least where they see room for improvement. Find out how they see themselves in the marketplace. Are they innovative? Are they adapting to market changes? What makes the brand unique?
- What Does Your Training and Support Look Like?
You need to know how you will be trained in this business venture and what ongoing support is offered. Will they be there to answer questions for you on a regular basis?
These are the key questions to ask a franchisor. This will open up the discussion and probably lead to follow-up questions, and help you find the franchise that is the best fit for you and your personal and financial goals.
For example, here at MassageLuXe, we want to partner with people who share our passion to support and encourage health, well-being, and quality of life. We are a massage franchise focused on delivering the highest quality massage, facial, and waxing services to our customers.
As a business, we believe in transparency, and we want this partnership to work for you and for us.
To learn more about spa franchise opportunities with MassageLuXe, scroll down to fill out the contact form below.