It is probably better not to hit the franchisor with these all at once - you will almost certainly have several meetings with your potential franchisor. However, you should ensure you get answers to all the relevant questions before signing the franchise agreement. If you buy the franchise, you will be entering into a long-term relationship with the franchisor, and it is therefore important that you should go into it with as full an understanding of the business, its potential and your mutual obligations as possible.
A good franchisor will welcome thorough questioning, as it shows that you are serious. Most franchisors should have a disclosure document which will include many of the answers, and you should read this thoroughly and discuss it with your professional advisors.
Harish Keshwani on August 24th, 2005 at 11:26 am
Here is a tip you can use while going through Franchise “Disclosure Document”. A Balance sheet, profit or loss statement or an income statement is almost always provided. Disclosure document also includes number of active franchises.
As a layman, you can pick-up earnings figure and divide it with number of franchises and then ultimately reverse calculate what is an average profit for a franchise. Feel free to contact me if you need the formula. It is a great way of doing your own rudimentary “Due Dilligence”.
Dane on August 24th, 2005 at 11:28 am
Thanks for the tip!
Gay on July 6th, 2006 at 5:07 am
Great site. Thanx for your work. It’s really interesting to read.