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What To Ask Yourself Before Buying a Franchise

We’re firm believers that you can’t get enough good advice when you’re making the decision to buy a franchise. Many people have different perspectives on the best way to do it, and we’re happy to pass on the soundest wisdom so that you can take it all on board before making that big investment.

Don Saszkowski does a credible job keep on top of the most important issues in franchising over at, and recently he invited Richard Parker, president of the Diomo Center to write a guest post with questions every entrepreneur should ask themselves before buying a franchise.

Here are some of the questions that we thought were the most illuminating:

On the franchise:
  • Is your territory protected and for how long and what area?
  • Are you required to meet certain annual sales figures and what happens if you don't?
  • Are there any family members working in the business? If so, how much are they paid (usually below market)? What additional expenses will you now incur to replace them?
  • What is the failure rate in the system?
On the franchisor:
  • Are they willing to finance the purchase?
  • If you have to sign a new contract, you need to carefully analyze any issues that could impact your sales and/or profitability. If for example the royalty rate and marketing fund has increased, then you will make less profit. You have to then adjust the numbers the seller has given you to accommodates these ratios.
  • Find out which are the best franchises in the system and call/visit with the owners. Ask them what they do best, the advice they would give you, and discuss the store you are considering but never disclose which one it is.

Ask yourself all of these questions. You’ll find more advice in Franchise Direct’s ' franchise buying guide.

Consider all of this before investing in a franchise and it’s likely you’ll be buying into a business you can trust.

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