How to Vet a Potential Franchisor

Engaging in any kind of franchise relationship should always be done with due diligence and the assistance of an experienced business attorney. After you have filled out the initial qualification form and gone online to do your research, this is officially clearing the first hurdle. However, after this time period you will need to engage in a phone call with the franchisor so the communication becomes a two-way conversation about the questions that you may have.

There are several different things that you should consider when vetting a potential franchise. Critical questions that you ask in this interview can tell you more about the company itself, but also about the individual in which you may be involved in doing business with on a regular basis. What follows are some of the most common questions that tend to emerge in these kinds of communications.

How Much Money Can I Make?

This is the number one most popular question that franchisees will ask. It is very difficult to answer this in a definitive and clear manner. The franchise disclosure document will provide information about financial performance representations, but only approximately 30% of franchisors will actually provide these and the value of that data can vary tremendously.

You may need to speak directly with other franchisees to gather what is necessary to create a business plan. Be prepared to understand that results will vary from one location to another and that many businesses do not make money in their first year. Someone who is promising you grandiose achievements may be something you wish to investigate further.

Do My Culture and Values Align with This Franchise Organization?

Every different franchise organization will have its own set of values that it operates under. In addition, companies will also have their own individual culture and way of communicating. You can get a sense of this in the initial interview with the franchisor and it is important to determine whether or not you can tell that your values and your culture will line up.

Do They Help with Financing?

It is important to understand whether or not the franchisor will assist you with obtaining the financing necessary to purchase the business or whether they will be able to point you in the direction of preferred lenders. You can also ask questions about where franchisees in the business company have found capital to start and grow this business. It is important to have a clear conversation and to take notes during this opportunity so that you can have a better conversation with your business planning attorney later on. Never engage in a franchise agreement until you have had the opportunity to consult with a lawyer.

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Written by Brett Trembly

Brett Trembly

In the South Florida legal community, Brett sits on the Board of the South Miami Kendall Bar Association, the Florida Bar 11th Circuit Grievance Committee, volunteers on the Florida Bar Young Lawyers Division Mentoring Program, the Dade-County Bar Associations Rainmakers Committee, and annually volunteers for Miami-Dade County’s Ethical Governance Day.