Questions to Ask a Franchisee
Twenty questions to put to current and former franchise owners while you are still deciding. They cover first-year numbers against projections, costs that never appear in the sales conversation, required suppliers and remodels, what happens when you call for help, disputes, and what it takes to sell. Best used on several owners you found yourself rather than the ones you were handed.
The questions
Open any question for the note
How long have you owned this, and what were you doing before you bought it?
Why ask it
Tenure sets the value of everything else they tell you. An owner in year one is often still repeating the franchisor's projections. One past year five has lived through a fee rise, a remodel demand, and a bad quarter. Their previous job also hints at which background the system actually rewards.
Can you walk me through your first-year numbers against the projections you were shown?
Why ask it
Ask for the comparison rather than the raw figures, since the gap is what decides whether you can afford this. Many owners will not share numbers with a stranger, but nearly all will say whether they hit the projection, and a long pause before answering is itself information.
When did you break even, and what did you live on until then?
Why ask it
The break-even date matters less than what funded the wait. Owners who lived on a spouse's salary, savings, or a second mortgage are describing the real capital requirement, which usually sits well above the working capital figure in the paperwork.
What did you end up spending money on that was not in the disclosure document?
Why ask it
Disclosure documents list categories, not surprises. Expect signage, permits, local advertising minimums, card processing, delivery platform commissions, and a build-out that ran over. These are the line items that quietly break a first-year forecast.
How many hours a week are you personally in the business, and how many did you expect?
Why ask it
The distance between the two numbers is where most franchise regret starts. Anyone still working sixty hours in year three is telling you the model does not carry enough management wage to let an owner buy their own time back.
Could you take a week off, and what happens here when you do?
Why ask it
The clearest test of whether this is a business or a job with debt attached. Listen for a trained second in command and what that person costs. Owners who cannot leave for a week now generally cannot in year five either.
How hard is it to hire and keep staff, and what are you paying at the moment?
Why ask it
Labor is the binding constraint in most food and retail systems, and local pay moves faster than a franchisor's model does. A current wage figure lets you test whether the margins you were shown were built on numbers that no longer exist in your area.
What do you have to buy from approved suppliers, and how do those prices compare with sourcing it locally?
Why ask it
Required purchasing is where a franchisor can earn more than it does on royalties, and it is among the most common sources of resentment. Ask about one high-volume item and its local equivalent. A wide gap there matters more than the royalty percentage.
Have you been required to remodel or replace equipment, and what did it cost you?
Why ask it
Refurbishment cycles can cost more than a year of profit, and the obligation usually lives in the agreement rather than in the sales pitch. Ask when the next one falls due and whether the franchisor contributes or arranges financing.
How often have fees or required spending gone up since you signed?
Why ask it
A fixed royalty rate can sit still while everything around it climbs: technology fees, ad fund contributions, mandatory software, paid training, new point of sale hardware. Owners can list these quickly, and the total drift since they signed is what you should budget for.
What did the training prepare you for, and what did you have to work out alone?
Why ask it
Length of training tells you nothing. The gaps do, and they are usually hiring, local marketing, payroll, and dealing with a landlord. That list is what you will be paying an accountant, a lawyer, or a manager to teach you later.
When you call the franchisor with a problem, what actually happens?
Why ask it
Support shows in mechanics rather than adjectives: whether a person answers, how long a reply takes, whether the field consultant visits or just sends a scorecard. Ask about the last problem they raised and how it ended.
Have you been able to try anything of your own, and what happened when you asked?
Why ask it
Systems vary enormously in how they treat initiative. The revealing part is the response to the request, because a franchisor that says no politely is very different from one that sends a compliance letter, and that difference will define your working life.
Do you see the advertising fund working in your own market?
Why ask it
Ad contributions are mandatory in most systems and their local value is uneven. Owners can say whether campaigns reach their area or whether the money funds national brand work that does nothing for a single store in a small town.
Have you had a dispute with the franchisor, and how did it end?
Why ask it
How it ended matters more than whether it happened. Listen for whether there was any route short of lawyers, and whether raising it affected their renewal, territory, or standing. A firm refusal to discuss it is worth weighing rather than dismissing.
Is there an independent franchisee association, and does the franchisor deal with it?
Why ask it
An association the franchisor actually negotiates with is one of the few genuine checks in a franchise system. Where there is none, or where corporate ignores it, individual owners have almost no leverage when terms change.
How are the other owners near you doing, and has anybody closed or sold in the last two years?
Why ask it
Closures and quiet resales are the data least likely to be put in front of you. Get names if you can, then try to reach anyone who left, because former owners are usually the only completely candid source available.
If you wanted to sell tomorrow, what would you have to do, and who approves the buyer?
Why ask it
Resale terms decide whether you are building an asset or renting a job. Transfer fees, franchisor approval of buyers, a right of first refusal, and the years left on the term all change what you could realize. Owners who have tried to sell describe the friction precisely.
What do you wish someone had told you before you signed?
Why ask it
Usually the single most useful sentence in the whole conversation, because it lets an owner be critical without accusing anyone. Ask five owners and pay attention to anything two of them mention independently.
Knowing what you know now, would you buy this franchise again?
Why ask it
The closing check, and the answer often sits in the delay rather than the words. Yes with a caveat is normal and healthy. A quick unqualified yes from someone the franchisor introduced you to is worth less than a hesitant answer from an owner you found on your own.
Doing the diligence
Practical guidance for the conversation itself
Who to call, and how many
- Speak to at least eight owners, not three, and include markets similar in size to yours. A system can work in a dense suburb and fail in a town of nine thousand people.
- In the United States, the franchise disclosure document contains a list of current outlets and of franchisees who left the system in the past year. Use that list rather than the references the salesperson offers.
- Call the people who exited. They are the only ones with nothing left to protect, and their reasons are the information the sales process is designed to keep away from you.
- Call more than one owner in the same region if you can. Two owners with the same market and different results usually means the difference is operational, which is useful for judging your own odds.
- Visit at least two locations in person during a busy hour and again during a dead one. Then go back and ask the owner what you saw.
How to ask about money
- Do not open with how much do you make. Ask about specific lines instead: rent per square foot, food or product cost as a share of sales, labor as a share of sales, what the ad fund and technology fees run per month.
- Bring your own draft profit and loss projection and ask them what is wrong with it. Owners who will not name a revenue figure will happily correct your assumptions line by line.
- Ask separately about the first year and about now. A mature location and a new one have almost nothing in common, and franchisors sometimes show averages that mix them.
- In the United States, any earnings figure a franchisor gives you is supposed to appear in the financial performance representations section of the disclosure document. Treat verbal projections that are not in that document as sales talk, and put nothing into your plan on the strength of them.
Reading what you hear
- Look for repetition across owners rather than intensity from one. One angry owner may be a poor operator; four owners naming the same supplier problem is the system.
- Separate complaints about the business from complaints about the franchisor. Long hours and hard hiring are retail; being fined for a menu change is a relationship.
- Notice who checks whether you were referred by corporate before answering. That reflex tells you how safe owners feel speaking freely.
- Take hesitation as content. Owners frequently cannot say certain things without risking their agreement, and a careful non-answer is often the clearest signal you will get.
Before you sign anything
Have the franchise agreement reviewed by a lawyer who works specifically on franchising rather than a general commercial solicitor, and do it before you pay any deposit. Ask for every promise made in conversation to be written into the agreement or a side letter, because nothing said in a discovery day is enforceable. Read the sections on territory, transfer, renewal, and termination as carefully as the ones on fees, since those decide what happens on the worst day rather than an average one. Finally, work out what a full year of your own household costs looks like with no income from the business, and make sure that money exists before you commit to the rest.