50 Questions to Ask a Franchisor Before You Buy

The most useful questions to ask a franchisor cover seven areas: the business model, total costs, financial performance, support and training, territory, franchisee relationships, and how you can eventually exit. Below are 50 specific questions grouped by topic. Ask the same core set of every brand you are considering, and check each answer against the Franchise Disclosure Document before you sign.

Most buyers ask good questions about the opportunity and weak questions about the downside. They ask how fast the brand is growing and forget to ask how many units closed last year. They ask about the grand opening and forget to ask about selling the business in year eight. The list below is weighted toward the questions that protect you.

These questions fit at different points in the process of learning how to buy a franchise. Some belong on your first call. Others make sense only after you have read the FDD, and some are best saved for franchise discovery day, when you meet leadership in person.

How to use these questions to ask a franchisor

A few ground rules make the list more useful.

• Verify against the FDD. Many answers should match something in the disclosure document. If the franchise development rep says one thing and the FDD says another, the FDD is what binds the franchisor.
• Get important promises in writing. If an answer matters to your decision, ask for it in writing or in an addendum to the agreement.
• Ask franchisees too. Use many of these questions on your validation calls and compare answers.
• Write the answers down. Use the same notes template for every brand so you can compare them later.

Under the FTC Franchise Rule, franchisors must provide the FDD at least 14 calendar days before you sign or pay. That is the minimum. Give yourself enough time to work through these questions properly.

Questions about the business model (1 to 7)

Start here. These tell you whether the business itself makes sense for you, before you get into fees and contracts.

1. What does a typical day look like for an owner in the first year, and how does it change by year three?
2. What does the ideal franchisee look like, and what background do your strongest owners share?
3. Can this business be run semi-absentee with a general manager, or does it require the owner on site?
4. How many employees does a typical unit need, and what roles are hardest to fill?
5. Who are the customers, and how much of revenue comes from repeat or recurring business?
6. Is demand seasonal, and how do owners manage cash flow through slow months?
7. What has changed in the business model over the past five years, and what changes do you expect next?

Question 3 matters more than buyers expect. Some franchisors allow semi-absentee ownership on paper but find in practice that owner-operated units perform better. Ask what proportion of current owners run the business through a manager.

Questions about costs and fees (8 to 15)

Item 7 of the FDD lists the estimated initial investment, and Items 5 and 6 list the fees. These questions fill the gaps between the line items.

8. What is the total investment range for a unit like the one I would open, in a market like mine?
9. What drives a unit to the high end of the Item 7 range instead of the low end?
10. How much working capital do owners actually use before the business covers its own expenses?
11. What ongoing fees will I pay besides royalty and the marketing fund, such as technology, software, or training fees?
12. Have royalty or marketing fund rates changed in the past five years, and can they change during my term?
13. Are there required vendors, and does the franchisor receive rebates or payments from them?
14. What equipment, vehicle, or remodel upgrades will I be required to make during the term, and roughly how often?
15. Do you offer any financing, fee deferrals, or incentives for veterans or multi-unit buyers?

For question 15, also ask your own lender and advisor. Our cornerstone on how to finance a franchise compares loans, home equity, and other options. If you are considering retirement funds, read about ROBS franchise financing and talk to a CPA before you commit.

Questions about financial performance (16 to 22)

You cannot ask a franchisor to tell you what you will earn. Item 19 of the FDD is the only place a franchisor may share financial performance information. What you can do is ask how that information was built and what it leaves out.

16. Does your FDD include an Item 19, and if not, why not?
17. Which units are included in the Item 19 data, and which were excluded?
18. Does the data reflect gross sales only, or does it include any costs or profit figures?
19. What major expenses are not reflected in the Item 19 numbers, such as rent, owner salary, or debt service?
20. How long does it typically take a new unit to reach breakeven, according to your own records?
21. What are the most common reasons a unit underperforms?
22. Can you connect me with franchisees at different performance levels, not only the top performers?

Treat the answers as background for your own analysis. Build your own estimates with an accountant, using numbers from franchisees in markets similar to yours.

Questions about training and support (23 to 30)

Support is what you are paying royalties for. Get specific.

23. How long is initial training, where does it happen, and who must attend?
24. Are travel and lodging for training included in the franchise fee, or are they extra?
25. What support do you provide during the first 90 days after opening?
26. How many franchisees does each field consultant or business coach support?
27. How often will I hear from my support contact, and through what channel?
28. What ongoing training is available for me and for my managers and staff?
29. What operations manuals, software, and reporting tools come with the franchise?
30. Who do I call when something breaks on a Saturday?

The answer to question 26 is one of the most revealing numbers you can get. A coach responsible for a small group of owners can know each business. One spread across dozens of units may only have time for problems.

Questions about territory and site selection (31 to 36)

Your territory defines your market for the next decade. Read Item 12 closely, then ask:

31. How is my territory defined: by zip codes, population, radius, or something else?
32. Is the territory exclusive, and are there exceptions for online sales, national accounts, or non-traditional locations?
33. Can the franchisor or another franchisee sell to customers in my territory?
34. Who finds and approves the site, and what criteria do you use?
35. How long does it typically take to secure a location and open after signing?
36. Do I have a right of first refusal on adjacent territories?

Question 35 drives your overall timeline. For a full picture of how long each stage takes, see our guide to how long it takes to buy a franchise.

Questions about franchisee relationships and health of the system (37 to 44)

These questions tell you how the franchisor behaves when things are not going well.

37. How many units closed, were terminated, or transferred in the past three years, and why?
38. Have any franchisees sued the franchisor, or been sued by it, and what were the issues?
39. Is there an independent franchisee association or a franchisee advisory council, and what does it influence?
40. How do you handle a franchisee who is struggling financially?
41. How are system-wide decisions, such as new products or technology, made and communicated?
42. How long have your key executives and department heads been in their roles?
43. How many new units do you plan to open in the next two years, and how will support staff grow with them?
44. Who owns the franchisor, and has ownership changed recently or is a sale expected?

Compare the answer to question 37 with Item 20, which reports openings, closures, and transfers. For question 38, check Item 3, which discloses certain litigation. Then call former franchisees from the Item 20 list and ask them the same question.

Questions about the agreement, renewal, and exit (45 to 50)

Most buyers spend too little time on how the relationship ends. Your franchise attorney will review the agreement, but you should understand the answers yourself.

45. How long is the initial term, and what are the conditions and costs to renew?
46. Can I sell my franchise, and what approvals, fees, and training does a buyer need?
47. Does the franchisor have a right of first refusal when I sell?
48. Under what circumstances can the franchisor terminate my agreement, and do I get a chance to fix a problem first?
49. What non-compete obligations apply during the term and after I leave?
50. Are any terms of the agreement open to discussion, such as development schedules or opening deadlines?

On question 50, expect that core terms like royalty rates are rarely changed. Smaller points sometimes are, especially for multi-unit buyers. Any change should go into the agreement in writing.

Red flags in a franchisor’s answers

The answers matter, and so does how they are delivered. Slow down if you notice any of the following:

• Earnings figures shared verbally that do not appear in Item 19.
• Reluctance to let you speak with former franchisees.
• Vague answers about closures or litigation.
• Pressure to sign quickly to secure a price or territory.
• Answers that conflict with the FDD, with no willingness to put them in writing.
• A support team that the sales rep describes in detail but you never get to meet.

The FTC’s Consumer’s Guide to Buying a Franchise lists similar warnings and is worth reading alongside this list. The SBA’s guide to buying a business or franchise is useful when you get to financing questions.

Turning answers into a decision

After you have asked these questions of three or more brands, put the answers in a simple grid. Score each brand on the areas that matter most to you, such as support ratio, territory protection, closure history, and total investment against your budget. Patterns become obvious quickly. One brand will usually stand out for good reasons, or one will fall away for bad ones.

Your answers will also depend on what you want from ownership. A buyer who plans to manage a general manager will weigh question 3 heavily. A buyer planning to own several units will care most about questions 36 and 43.

If you are not yet sure which industries and ownership styles fit you, start there. Take the free Franchise Genie assessment to get your owner archetype and three industry categories that match your budget and goals. Then bring this list to every franchisor you talk to.