The following excerpt is from Mark Sieberts book “The Franchise Handbook: – Everything You Need to Know About Buying a Franchise”
It’s important to prepare for a franchise’s Discovery Day — the day you meet the franchisor face to face, usually at their headquarters. The goal of this meeting is to sell you on why you should become a franchisee and, at least with good franchisors, is also designed to be sure you’re a good fit for the franchisor in terms of knowledge, experience, attitude, and culture.
Before the meeting, you should develop a list of questions you’d like to address during the visit. The more prepared you are walking into Discovery Day, the more you’ll get out of it.
Many of the most revealing questions you should ask your franchisor will be based on a thorough reading of the FDD. For instance, if the franchisor is involved in litigation, ask about it. If the franchisor has a significant number of franchise failures, ask about them. If the franchisor has been involved in a bankruptcy — ask.
If you’re not sure where to begin, however, the following sample questions are ones you should ask a potential franchisor. These questions are intended as a starting point for your analysis — so don’t look at them as a complete list.
1. Tell me about your competitors, especially those operating in my local market. How will we address them based on your market analysis?
2. What kind of changes are on the horizon for this concept? Marketing? Operations?
3. How are you planning to respond to the competitive threat posed by current competitors? Potential competitors?
4. What’s the biggest competitive threat in the marketplace? What’s the biggest opportunity? (Note: Pay close attention here. If you don’t get a substantive answer, either you’re being sold or you’re dealing with someone who simply doesn’t know the answer. In either case, be wary.)
5. Who is your customer at the end user level? What’s happening to this market?
6. What are you really selling? (For example, on one level, McDonald’s is selling hamburgers. But on another, it’s selling quality, service, and value delivered fast with a clean restroom.)
7. What’s happened to the market over the past five years? To your market share? To your strategy? What new competitors have surfaced, and why?
8. Who are your major vendors? Do they give terms on initial inventory? What terms? What terms do they provide on ongoing purchases?
9. What are you doing to secure the best prices on products? Are you also negotiating with service and equipment vendors (e.g., insurance, office equipment, etc.)?
10. How much do you spend on research and development? How much as a percent of revenues?
11. What are you trying to accomplish with your advertising? Who’s your agency? Why did you choose them?
12. Are there any plans to sell the business in the next five years?
13. Where do you see the company five years from now? Are you planning any major strategic changes in the concept? Do the owners plan on eventually selling the company or passing it on to their heirs?
14. What major changes has the CEO implemented since he took over (or in the past three years)? Is this part of an overall strategy?
15. How are you attempting to differentiate yourself in the franchise marketplace?
16. Are any major changes to management planned?
17. What support do you provide to franchisees that helps them build revenues during their first six to 12 months of operation?
18. In what ways do you collect best practices and share them with franchisees in your system?
19. What key performance indicators (KPIs) do you share with franchisees? In what way is the information shared?
20. Why are you not using an FPR (assuming they aren’t)?
21. Joe Franchisee told me X. How do you respond to that?
22. What is your biggest franchise disaster? Why did it occur? What’s been done to prevent a reoccurrence? What’s the name of the franchisee involved?
23. What’s the best thing you can say about each of your competitors? What are their strengths and weaknesses?