5 Questions to Ask Before Investing in a Franchise

A year ago, I made the decision to purchase a home health care franchise. After hours of endless research, I concluded that a franchise would be my best option, given my limited experience in the home health care industry. I needed as much support as possible, and in addition to meeting the licensing requirements in my state, starting the business with the franchise seemed advantageous. They boasted proven strategies, user-friendly software for day-to-day operations, and a supportive staff to guide me along the way.

I believed my research was thorough, exploring opportunities with two other companies before settling on the franchise I selected. However, a year later, I find myself second-guessing my decision for various reasons. Support dwindled after the initial three months, and even during low revenue months, I'm obligated to pay a hefty royalty fee, potentially facing non-compliance.

If you're contemplating purchasing a franchise, it's a prudent decision, especially if you're new to the industry you're venturing into. Embarking on the journey of franchise ownership is an exciting prospect, but before diving headfirst into this business endeavor, it's essential to conduct thorough research and ask the right questions. Here are five key inquiries to consider before deciding to invest in a franchise:

1. Is the Franchise Model Aligned with Your Passion and Skills?

Ask yourself if the franchise aligns with your personal interests, skills, and long-term goals. Success in any business venture often stems from passion and dedication, so it's crucial to choose a franchise that resonates with your values and expertise.

2. What is the Franchise's Track Record?

Dig deep into the franchise's history and track record. Inquire about the success stories of existing franchisees and any challenges they may have faced. This information will provide insights into the franchise's viability, support systems, and the potential return on investment. Look for franchises with a proven track record of supporting their franchisees and fostering a strong network.

When you receive a Franchise Disclosure Document, contact at least three franchisees for their honest opinions. While the franchise may initially provide 2-3 contacts, remember that these individuals are likely their biggest cheerleaders and success stories, potentially offering biased perspectives. A Franchise Disclosure Document outlines key points about the franchise agreement and provides detailed financials.

3. What are the Total Costs Involved?

Understanding the financial commitment is paramount. Beyond the initial franchise fee, inquire about ongoing royalty fees, marketing contributions, and other hidden costs. Additionally, investigate the estimated total investment, factoring in working capital and other potential expenses. Ensure you have a clear understanding of the financial aspects to make informed decisions about your investment.

It is crucial to understand your monthly financial obligations. Is there a grace period of three months or so where you don't have to pay anything as you get your franchise off the ground? If not, can you negotiate one? Also, in months where you make no money, what will be required for payment, if anything?

4. What Support and Training Does the Franchisor Provide?

A successful franchise system thrives on the support it provides to franchisees. Inquire about the training programs, operational support, and marketing assistance offered by the franchisor. A robust support system can significantly impact your chances of success and help navigate challenges that may arise during the initial stages of your franchise ownership.

Consider the duration of the training offered. Is it limited to the first month, or is additional assistance available if needed?

5. Are You Comfortable with the Franchise's Culture and Values?

Every franchise has its unique culture and values. It's essential to align yourself with the ethos of the franchisor to create a harmonious and mutually beneficial partnership. Investigate the company culture, its commitment to ethical business practices, and how it engages with franchisees. A shared vision and values can contribute to a more satisfying and successful franchise experience.

Investing in a franchise is a significant decision that requires careful consideration and due diligence. By asking these five crucial questions, you'll be better equipped to assess the suitability of a franchise opportunity and make an informed decision that aligns with your entrepreneurial goals. Remember, thorough research is the key to a successful and rewarding franchise ownership experience. If you'd like to read more about my entrepreneurial journey and gain helpful tips for success, please check out my Ebook available for purchase here.