Twenty-five questions to ask a franchisor

The following are some questions you might like to ask the franchisor.

Please bear in mind that there are many types of franchises and some of the questions may appear to be out of context. We recommend that you draw up your own questionnaire, with the questions tailored to the specific industry you are interested in.

1. Will you supply me with a breakdown of all costs I stand to incur when I open the business?

2. How much working capital will I need, and what help can you give me in preparing proper projections?

3. Will you assist me with raising finance, and what form will this assistance take?

4. In your experience, how long will it take to start trading from the time I sign the contract?

5. What will my training consist of, how long will it last and are all training costs included in the upfront franchise fee?

6. What help and guidance do you offer in site selection and the setting up of the business?

7. Do you assist with introduction to existing customers (in the case of a business-to-business franchise) and/or an opening promotion (in the case of a retail franchise)?

8. What is the expected break-even for the size of unit and how long should it take me to reach this level of sales?

9. What is the level of ongoing franchise fees, how are they calculated and when are they payable?

10. Am I expected to contribute to any other costs, for example, advertising and promotional expenditure that you incur? If so, how are they calculated and when are they payable?

11. Am I obliged to undertake advertising and promotions of my own, at my own expense? If so, what help do you provide?

12. After the business is up and running, what ongoing support can I expect to receive?

13. When was the core business established, and when did you begin to franchise?

14. Are you a member of the Franchise Association of Southern Africa (Fasa)? If not, why not?

15. Will you issue me with a disclosure document? If so, does it conform to Fasa’s requirements?

16. If you do not issue a formal disclosure document, may I have a full list of all franchisees within the network and permission to contact them?

17. Will I be permitted to see the operations and procedures manual before I sign the franchise agreement?

18. Have any of your network’s franchisees failed in the past and, if so, what were the reasons for these failures?

19. How thoroughly do you vet prospective franchisees?

20. In terms of my trading area, will you protect my interests to the best of your ability? What is the proximity of competition and other franchisees?

21. Are you operating in areas with similar demographics as my proposed territory? If so, can I see operating results of one such franchisee, with franchisee’s identity blocked out if desired?

22. Does your network operate a Franchisee Representative Council or similar body? If so, may I meet with its chairperson?

23. How do you handle grievances with existing franchisees?

24. Who are the business’s competitors, what are their respective strengths and weaknesses, and how do you propose I outsmart them within my territory?

25. What are some of the threats your company sees in the marketplace?

Questions provided by whichfranchise.co.za

Need more info?

If you want to know more about franchising, contact:

• The Franchise Association of South Africa can be reached on 011 615 0359. Its website address is www.fasa.co.za.
• The whichfranchise.co.za website, operated by Franchising Plus, offers free articles and information.
• www.franchise.org is the website of the International Franchise Association.
• The Small Enterprise Development Agency, or Seda, is a government agency which supports small businesses, including franchises. Contact them on 012 441 1000 or www.seda.org.za.
• You could also try the Department of Trade and Industry, which runs Seda, on 0861 843 384 or www.dti.gov.za.

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