25 Questions to Ask a Franchisor Before Buying a Franchise
Buying a franchise is a major decision.
And while the franchisor will have plenty of information to share with you, remember something important:
You are interviewing them, too.
The franchise discovery process isn’t just about finding out whether the franchisor wants you as a franchisee.
It’s about finding out whether you want to become a franchisee in that system.
A good franchise opportunity should make sense financially, operationally, and personally.
That means asking better questions before you invest.
The Federal Trade Commission recommends that prospective franchise buyers investigate the opportunity carefully, review the Franchise Disclosure Document (FDD), evaluate financial information, and speak with current and former franchisees.
So before you sign a franchise agreement or invest your money, here are 25 questions worth asking.
1. What Makes Your Franchise Different From the Competition?
Every franchisor has a value proposition.
But “great brand,” “excellent support,” and “proven system” aren’t enough.
Ask:
What specifically gives your franchise a competitive advantage?
Then dig deeper.
- Who are your biggest competitors?
- What makes customers choose you?
- How difficult is it for competitors to copy your model?
- What advantages does your franchisee receive from being part of the system?
You aren’t looking for the best sales pitch.
You’re looking for a clear and defensible business advantage.
2. What Does Your Ideal Franchisee Look Like?
This is one of the most revealing questions you can ask.
A good franchisor should have a clear understanding of the type of person who tends to succeed in its system.
Ask:
What characteristics do your most successful franchisees have in common?
Then ask:
What characteristics tend to make someone a poor fit?
The answer matters because franchise ownership isn’t one-size-fits-all.
The FTC recommends evaluating your own abilities, goals, financial resources, and desired level of involvement before selecting a franchise.
The right question isn’t:
“Can I buy this franchise?”
It’s:
“Am I the right person to operate this franchise?”
3. How Much Does It Really Cost to Open the Franchise?
Don’t focus only on the franchise fee.
Ask the franchisor to explain the total initial investment.
That may include:
- Initial franchise fee
- Real estate
- Leasehold improvements
- Equipment
- Technology
- Inventory
- Vehicles
- Insurance
- Professional fees
- Marketing
- Payroll
- Working capital
- Other startup expenses
Then ask:
“How much additional working capital should I have after opening?”
The FTC specifically advises prospective franchisees to understand startup costs and other expenses beyond the initial franchise fee.
4. What Are the Ongoing Costs?
Your investment doesn’t end when you open.
Ask about:
- Royalties
- Advertising fees
- Technology fees
- Required software
- Renewal fees
- Supply costs
- Marketing expenses
- Other recurring fees
Then ask:
“Which of these costs can increase during the term of the franchise agreement?”
You want to understand the economics of owning the franchise several years from now, not just on opening day.
5. How Does the Franchise Actually Make Money?
This may sound obvious, but don’t assume you understand the business model just because you understand the product.
Ask the franchisor to walk you through the economics.
For example:
Where does revenue come from?
What are the biggest expenses?
What drives profitability?
What factors have the biggest impact on margins?
A franchise can generate impressive revenue and still produce disappointing profits.
Revenue isn’t profit.
Make sure you understand the difference.
6. What Financial Performance Information Can You Provide?
If you’re trying to understand the financial potential of a franchise, this is a critical question.
Ask:
“What financial performance information is included in your FDD?”
Financial performance representations, when provided by the franchisor, are addressed in Item 19 of the FDD.
The FTC advises prospective franchisees to examine the basis and assumptions behind any earnings claims rather than relying on broad promises about potential income.
Ask:
- What does the data represent?
- How many locations are included?
- What period does it cover?
- Are there geographic differences?
- What expenses are reflected?
- What assumptions were used?
And if something doesn’t make sense, ask.
7. What Does a Typical Franchise Owner Do Every Day?
This question can prevent a major mismatch.
Ask:
“What does a typical week look like for a franchise owner?”
Find out how much time is spent on:
- Operations
- Sales
- Marketing
- Hiring
- Employee management
- Customer service
- Financial management
- Administrative work
Then ask:
“How many hours do successful owners typically work?”
Don’t buy a franchise based on the lifestyle you hope to have.
Understand the lifestyle the business actually requires.
8. Can This Franchise Be Semi-Absentee?
If you’re looking for a business that eventually can be manager-run, ask directly.
But be careful with the word “passive.”
A franchise with recurring revenue or strong systems isn’t automatically a passive investment.
Someone still needs to manage:
- Employees
- Customers
- Operations
- Finances
- Marketing
- Performance
Ask:
“What does it take to transition this business to a manager-run operation?”
And:
“How many successful franchisees actually operate this way?”
The answer is much more useful than simply hearing that the model is “semi-absentee.”
9. What Training Do You Provide?
Training is one of the major reasons people choose franchising.
But “training is included” doesn’t tell you much.
Ask:
- How long is initial training?
- Where does it take place?
- Who attends?
- Is it hands-on?
- Does employee training exist?
- Is training available before opening?
- What ongoing training is provided?
- What happens when systems or technology change?
Then ask current franchisees:
“Did the training actually prepare you to operate the business?”
10. What Support Do Franchisees Receive After Opening?
Training gets you started.
Support helps you continue.
Ask what support is available for:
- Marketing
- Operations
- Recruiting
- Technology
- Sales
- Training
- Purchasing
- Business planning
- Local marketing
Then get specific.
Ask:
“Who would I contact if I have an operational problem?”
“How quickly does the support team typically respond?”
“How often will I interact with the franchise team?”
“Support” is only valuable if you understand what it actually means.
11. How Is My Franchise Territory Defined?
Territory can have a significant impact on your business.
Ask:
- How is my territory determined?
- Is it exclusive?
- Is it protected?
- Can another franchisee operate nearby?
- Can the franchisor open a corporate location nearby?
- Can the franchisor sell directly into my territory?
- How are online customers handled?
Don’t assume that “protected territory” means you’re protected from every form of competition.
Read the actual language in the franchise agreement and FDD.
12. How Many Franchise Locations Have Closed?
This is a question you should absolutely ask.
Don’t only ask how many locations have opened.
Ask:
How many have closed?
Then ask:
Why?
Closures can happen for many reasons.
Retirement is different from poor economics.
Selling a location is different from shutting one down.
Understanding those differences matters.
The FTC recommends reviewing the franchisor’s disclosure information regarding franchisee turnover and investigating the reasons behind closures and other changes in the system.
13. Why Have Franchisees Left the System?
This is an uncomfortable question.
Ask it anyway.
“Why do franchisees leave your system?”
Then compare the answer with the information disclosed in the FDD.
You want to understand whether franchisee departures are primarily due to:
- Retirement
- Resale
- Personal circumstances
- Financial difficulties
- Disagreements
- Termination
- Business performance
The reason matters.
14. Can I Speak With Current Franchisees?
If you’re serious about buying a franchise, talking to franchisees should be part of your validation process.
Ask the franchisor for franchisee contacts.
Then speak with several different owners.
Don’t only talk to the franchisees who are presented to you.
The FDD contains franchisee information that can help you conduct this research, and the FTC recommends contacting current and former franchisees about their experience.
15. What Should I Ask Current Franchisees?
Once you get on the phone with a franchise owner, don’t waste the opportunity.
Ask:
“Would you buy this franchise again?”
Then ask:
- Did the actual startup costs match expectations?
- Was the training effective?
- Is the franchisor responsive?
- What is the biggest challenge?
- What surprised you?
- How involved are you in the business?
- What would you do differently?
- What do you wish you knew before buying?
You may learn more from a 30-minute conversation with a franchisee than from several hours of presentations.
16. What Are the Biggest Challenges New Franchisees Face?
Ask the franchisor:
“What are the three biggest challenges a new franchise owner should expect?”
Every business has challenges.
You want to know whether the franchisor is willing to talk about them honestly.
Listen for specifics.
If everything sounds effortless, ask more questions.
A realistic answer is often more valuable than a perfect one.
17. How Much Local Marketing Will I Need to Do?
National brand recognition doesn’t automatically create local customers.
Ask:
- What marketing does the franchisor provide?
- What does the advertising fund cover?
- What local marketing am I responsible for?
- How much should I budget?
- What marketing channels work best?
- Can franchisees create their own local campaigns?
Understand exactly what you are responsible for generating locally.
18. How Does the Franchisor Make Money?
This is a question prospective franchisees don’t always ask.
Ask:
“Besides the initial franchise fee and royalties, are there other ways the franchisor or its affiliates generate revenue from franchisees?”
Understanding the financial relationship matters.
You want to know how incentives are aligned between:
You.
The franchisor.
The franchise system.
19. What Changes Are Planned for the Franchise System?
Franchising isn’t static.
Technology changes.
Customer behavior changes.
Competition changes.
Ask:
“What major changes do you anticipate making to the franchise system over the next three to five years?”
Then ask:
- Are new technologies being introduced?
- Will franchisees need new equipment?
- Are required investments expected?
- Is the business model changing?
- What new services or products are planned?
You aren’t just buying today’s business model.
You’re entering into a long-term relationship.
20. What Is the Franchisor’s Financial Position?
You’re investing in a relationship with the franchisor.
So understand who you’re partnering with.
Review the financial information provided in the FDD and ask questions about the franchisor’s financial health.
You should also have qualified professionals review financial information when appropriate.
The FTC recommends consulting independent legal and financial professionals as part of the franchise evaluation process.
21. What Litigation Has the Franchisor Been Involved In?
Don’t be afraid of the question.
Ask:
“Can you explain the litigation disclosed in the FDD?”
The FDD includes information about certain litigation involving the franchisor and other relevant parties.
Don’t automatically assume litigation means a franchise is bad.
Instead, understand:
- What happened?
- Who was involved?
- What was the outcome?
- Is the issue ongoing?
- Does it reveal a broader concern?
The important thing is understanding the context.
22. What Happens If I Want to Sell My Franchise?
You’re probably focused on buying.
But eventually, you may want to exit.
Ask:
“What are the requirements for selling my franchise?”
Understand:
- Transfer requirements
- Transfer fees
- Approval requirements
- Buyer qualifications
- Renewal requirements
- Restrictions after termination
The FDD and franchise agreement should provide important information about renewal, termination, transfer, and related obligations.
Think about your exit strategy before you enter.
23. What Happens If the Business Doesn’t Perform as Expected?
This is perhaps one of the most important questions you can ask.
“What happens if my business struggles?”
Ask about:
- Additional training
- Operational support
- Business coaching
- Restructuring
- Required corrective actions
- Default provisions
- Termination provisions
You’re not being negative.
You’re doing due diligence.
You should understand both the upside and the downside before investing.
24. What Does the FDD Tell Me That We Haven’t Discussed?
Once you receive the Franchise Disclosure Document, read it carefully.
The FDD contains 23 disclosure items covering areas such as:
- Franchisor history
- Litigation
- Bankruptcy
- Fees
- Initial investment
- Restrictions
- Training
- Territory
- Renewal
- Termination
- Financial performance representations
- Franchisee turnover
- Financial statements
The FTC Franchise Rule requires franchisors to provide the FDD to prospective franchisees before they sign or pay, subject to the rule’s timing requirements.
Don’t treat the FDD as paperwork to get through.
Treat it as a due-diligence tool.
25. Why Should I Choose Your Franchise?
Save this question for later in the process.
Ask:
“Why should I choose your franchise over the other opportunities I’m considering?”
Then listen.
What makes the opportunity different?
What makes the franchise valuable?
What does the franchisor believe it does better than its competitors?
Now compare those claims with:
- The FDD
- Franchisee feedback
- Financial information
- Market research
- Your own goals
The strongest franchise isn’t necessarily the one with the most impressive presentation.
It’s the one that makes sense when you look at the entire picture.
The Questions Don’t Stop With the Franchisor
Here’s something important to remember:
The franchisor is only one source of information.
Your due diligence should include several perspectives.
Talk to the Franchisor
Understand the business model, systems, support, investment, and expectations.
Talk to Current Franchisees
Find out what ownership is actually like.
Talk to Former Franchisees
Understand why people left.
Review the FDD
Verify what you’ve been told and investigate the disclosures.
Talk to Professionals
A qualified franchise attorney and accountant can help you evaluate the legal and financial aspects of the opportunity.
The FTC specifically recommends independent professional advice as part of the franchise-buying process.
Your Franchise Due Diligence Checklist
Before moving forward with a franchise opportunity, make sure you can answer:
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What is my total initial investment?
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How much working capital will I need?
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What are the ongoing fees?
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How does the franchise make money?
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What does the owner actually do?
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How many hours will I realistically work?
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What type of franchisee succeeds?
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What training is provided?
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What ongoing support is provided?
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How does the territory work?
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What financial performance information is available?
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What does Item 19 say?
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What does Item 20 reveal?
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How many locations have closed?
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Why have franchisees left?
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Have I talked to current franchisees?
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Have I talked to former franchisees?
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What are the biggest challenges?
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What litigation has the franchisor disclosed?
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What happens if the business struggles?
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What happens if I want to sell?
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What changes are planned for the system?
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Have I reviewed the entire FDD?
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Have I had the franchise agreement reviewed?
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Does this franchise actually fit my goals?
Don’t Buy the Franchise. Understand the Franchise.
There’s a big difference.
It’s easy to get excited about a brand.
You see the marketing.
You hear about the opportunity.
You imagine yourself owning the business.
But a franchise investment deserves more than excitement.
It deserves questions.
Hard questions.
You need to understand the numbers.
You need to understand the work.
You need to understand the franchisor.
You need to understand the risks.
And you need to understand whether the opportunity fits you.
Because the goal isn’t to find the most popular franchise.
It isn’t to find the franchise with the biggest revenue numbers.
And it isn’t to find the franchise with the best sales presentation.
The goal is to find the right franchise for you.
Need Help Finding the Right Franchise?
You don’t have to research thousands of franchise opportunities by yourself.
Go Franchise helps prospective franchise owners explore and compare franchise opportunities based on their goals, investment range, experience, lifestyle, and desired level of involvement.
There’s no pressure to commit to a franchise just because you start exploring your options.