PROS & CONS | GLOSSARY | THINGS TO CONSIDER
QUESTIONS TO ASK THE FRANCHISOR | COMMONLY ASKED QUESTIONS

1. “What is Franchising?” Franchising is a method of distributing products or services through a proven concept. An initial investment is required of the franchisee paid to the franchisor, which grants the franchisee the right to utilize their trademarks, trade name, marketing plan and business concepts.

2. “Is franchising right for me?” The concept of franchising affords individuals to be in business for themselves, not by themselves. Franchisors have established standards and rules, sometimes making decisions that you might not agree with. If you desire to own your own business and be your own boss, then there may be a place for you in franchising. Before you invest, do your homework and investigate. Ensure that you understand the franchise model and that it is one with which you agree with. A priority for success in a franchise is to follow the proven concept and programs the franchisor trains you on.

3. “Why would I want to buy a franchise?” Franchises have the highest success rates and the lowest failure rates of any business in North America today! More than 95% of all franchises are still in business after five years because they all come with built-in proven success formulas used by franchisees across the country. When you purchase a franchise you will receive on-going support in marketing, training and management guaranteed by your agreement with the franchisor.

4. “What can a franchise do for me that I cannot do for myself?” A franchise is already a functioning business system. As a franchisee you can step into an already established concept, with much less risk for failure. Most importantly, it provides you with brand recognition and often times the Franchisor provides financing and national accounts, so you can start out with cash flow and quicker profits.

5. “Why should I pay royalties?” Royalties are what makes the formula work. What would it cost you to hire a management, marketing, advertising and customer support team? The answer is…a lot more that the typical owner would ever spend! How much would you put back into the business? You certainly couldn’t hire this group for under 10% and the vast majority of all royalties are between 4 and 8%. The strength of royalties is that instead of the individual owner footing the bill to run his or her business, the expense is shared with all of the franchisees within the organization.

6. “How much money can I make?” Franchising allows the buyer the perfect way to get this answer. All franchisors supply to their prospects a complete list of their franchisees with names and phone numbers and they will require the prospects to call as many of these franchises as possible. This is part of your homework and is important because it allows the buyer to ask all of the “important questions”, such as: How much of a profit can I make? What was the length of time did it take for you to get your business up and running? Were there any surprises that I need to know about? Many franchisors have printed earning claims in their UFOC documents but they will still insist that all interested prospects call the franchises and get the “real answers” or detailed information needed to make your decision.

7. “What kinds of business lend themselves to franchising?” Practically every business form you can imagine lends itself to franchising.

8. “What is a Uniform Offering Circular (UFOC)?” This is the document supplied by the franchisor to prospective franchisees that describes in detail the franchise offering. It should be the main point of the initial review of the franchise. Based on the law, it supercedes and overrules anything that is printed or said by other franchise literature and the sales persons representing the franchisor. In other words, if the sales person tells you one thing and the UFOC tells you something different, the UFOC takes precedent or is final.