Important Questions to Ask Before Purchasing A Franchise

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You might be able to strike some franchise opportunities off your list by a simple examination of the basic literature offered by the franchiser. But what about those opportunities that have yellow flags instead of red ones? If you're unsure about any aspect of a franchise you're considering, you need to ask the right questions before you can make a final decision.

Find out how well the franchiser evaluates its potential franchisees. If the franchiser's growth is dependent in any way on not properly vetting franchisees, you might want to look elsewhere. Just one poor franchisee can damage the brand as a whole and if the franchiser isn't vetting them, you may have more than one bad apple in the mix already.

Ask a lot of questions about the in-place management team. Management can make or break a franchise from the top down. Research the background of every member of the management team. Do they have franchise experience? Have they dealt with sudden growth in a franchise before and what are they doing to support rapid growth now? Get the answers to all these questions before moving forward with the opportunity.


Research the franchiser's current system, including their commitment to technology and staffing situation. The franchiser must have a stable and reliable system in place to handle franchisees and coordinate efforts, as well as enough staff to handle the workload. If the franchiser experiences sudden growth and can't support it, the outcome could be disastrous for the franchisees.

Don't forget the all-important question about the exclusivity of territory. If you can't get exclusive territory or the size is small, you'll need to find out if you're working with the other franchisees or competing against them. Decide whether the product or service is in enough demand to sustain multiple locations close together. Get literature from each franchise you're considering to help you make your decision and make that decision soon.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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