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Jun72022
OWNERSHIP

Questions to Ask When Buying a Franchise Business

Once you’ve decided to embrace your entrepreneurial spirit and pursue franchise ownership, you’ll certainly have a lot of questions. From the financial aspects like earning potential and franchise costs to how much marketing support is available, you’ll need to spend time researching, conducting due diligence and weighing your options before opening a franchise.

Read more below to find out which questions to ask when buying a franchise business. While they do cover several aspects of becoming a franchise owner, this is not a comprehensive list.

Top 10 Questions to Help Evaluate a Franchise Opportunity

1. What is the earning potential for this franchise?

One of the main reasons people open a business is to make a better living financially. While it may be easy to envision a future without financial struggles, it will take time to reach the break-even point and start making a profit. Talk to the franchisor as well as other franchisees within the network to get an idea about the earning potential that you could expect as a franchise owner.

2. What type of research or due diligence should I conduct?

Before buying a franchise business, you’ll want to research the business comprehensively, including evaluating assets and liabilities, commercial potential, legal and operational details, potential risks and many other factors. Due diligence, in effect, means doing your homework to help determine if the business is a sound investment. In addition to doing your own research, it’s also a great idea to enlist the help of an accountant and an attorney to help you review and analyze financial and legal documents. Opening a franchise business is a major investment in your future, and a decision that should not be taken lightly.

3. What is the total investment?

When you’re evaluating a franchise opportunity, you’ll want to understand the estimated initial investment, fixed costs, variable costs and whether they are a one-time or ongoing cost for the length of your franchise agreement. Total investment in a franchise business would include the franchise fee, equipment, lease costs, training, advertising, inventory, royalties, working capital, and potentially several more costs depending on the type of business you are opening.

Make sure to thoroughly review the Franchise Disclosure Document (FDD) before investing in a franchise, which details the associated costs plus many other factors relevant to making an informed decision.

4. What are my financing options?

After you research the cost involved with buying a franchise, you’ll need to determine a plan for financing the business. A common way for franchisees to finance their business is through a bank loan, which is typically secured by collateral like the equity in your home. Sometimes certain required equipment can be leased, which could be helpful in freeing up more cash for other portions of the business.

Franchisors may also offer financing options for investors in their brand. Guidant Financial provides a full suite of financing options for potential franchisees with The UPS Store, including 401(k) business funding, SBA loans, portfolio loans, unsecured loans and more. The UPS Store also provides special discounts for Veterans and minorities.

5. What is the training like before opening the business?

When evaluating a franchise opportunity, it’s important to know what type of and how much training is included in your commitment. Does the franchisor provide a comprehensive, hands-on training program or is the training more self-service? Understanding the training phase on becoming a franchise owner should be part of your overall research.

New franchisees acquiring a The UPS Store complete over 200 hours of comprehensive training that includes web-based training, in-store experience, a university business course and print services training.

6. What marketing support do you provide?

Marketing and advertising support play an important role in the success of any brand or business. Among the many advantages of franchising, brand awareness is one of the most important. A brand is more than just a logo, it’s everything a consumer knows and perceives about a business. Marketing and advertising support help build brand awareness, so franchisees should understand what is provided by the franchise brand at the national, regional and local level, as well as what is expect from the franchisee.

The UPS Store has established a strong brand name over the last 40 years and continues to support franchisees across multiple advertising channels, allowing them to focus their strengths on their operations.

7. What brand standards must be followed?

Another important question to ask when buying a franchise business is what type of brand standards must be followed. Everything from logo and brand name usage to whether certain products are required are optional, all factor into the brand standards or guidelines. The franchisor wants to ensure that all locations provide the same brand experience no matter where the customer is. An established franchise brand will already have tried-and-true standards in place while a newer or startup franchise may still be perfecting its brand guidelines.

8. How involved is the corporate office or franchisor?

One of the benefits of opening a franchise business is accessing a proven business model instead of having to build up a brand completely from scratch. When you buy a franchise, you’re taking the existing model and implementing it for your own business, which eliminates the time and effort that would be involved with starting a non-franchised business. Asking about the level of involvement from the corporate office is certainly beneficial, as sometimes franchisees may need extra support.

In addition to the comprehensive training and ongoing support available for The UPS Store franchise owners, a dedicated team is always available to answer questions or help when needed. Franchisees are also encouraged to connect with the vast network of other retail owners to collaborate and develop lasting relationships with fellow franchisees.

9. What kind of opportunity exists for future growth or expansion?

When you invest in a franchise brand, you’ll want to consider opportunity for future growth or expansion. Opening your first location may be your sole focus initially, but after you open your doors, adjust to the daily operations and get to know your customer base, you may consider additional locations. You’ll want to know if the brand is growth-focused and/or consistently innovating to help franchisees maximize their potential.

At The UPS Store, available markets are listed on the website, along with non-traditional opportunities like the Store in Store concept, hotels and convention centers, military bases and colleges. Innovation is also a priority, as shown with the refreshed, modern store design.

10. What are the brand’s values?

In addition to making sure the operations, financials and other specifics fit your business goals, you’ll want to ensure the brand’s values are a good fit for your personal values. Consider what’s important to you and align with a brand that shares common themes—while it may not be relevant at all times, investing in a brand with clearly established values and ones that align with your own will pay off in the long run.

Core values of The UPS Store continue to drive the company’s mission, which has led to becoming the largest network of postal, shipping and business services in the U.S.

 

When buying a franchise, make sure to ask these questions and more before committing to the opportunity. Interested in learning more about becoming a retail owner with The UPS Store? Learn more about the franchise opportunity and contact our franchise development team to discuss the possibility of owning your own location.