Facing New Franchisees

Signing new franchisee contracts, expanding the business at a fast pace looks quite exiting to everybody looking at franchise business. It is definitely exiting. However only franchisors know how many long hours they have invested in finding potential franchisees, how hard it was to land every new sale and how much more work is out there in keeping their franchisees happy and successful.

Franchise business, as easy as it seems, is not for everyone. Certain people just do not fit to be franchisors while others cannot manage to keep up with the effort required to get into the business and develop it into a prosperous empire.

One of the most difficult challenges every franchisor faces is convincing prospective franchisees that opening their franchise unit is a lucrative opportunity. The situation is complicated additionally by numerous Federal and state regulations that restrict franchisors to discuss certain topics with their franchisees prior to signing a franchise agreement. Here are a few of the questions a potential franchisee may ask you.

Frequently asked questions by potential franchisees and how to answer them.

• What profits I may expect after signing up with your franchise? Be very careful if you are asked such question as well as any question regarding money, revenues, profits or other financial matters. Federal and state regulations strictly forbid discussing potential revenues and profits with potential franchisees. Make sure your staff is well trained in this respect as failing to comply with franchising laws can end up in thousands of dollars in fees and even some personal penalties.

• What kind of support you provide your franchisees? Your prospective franchisee is looking for security. It is normal that they are concerned about the training and support they are going to receive. Do not underestimate this question as whether or not you will sign a contract may depend on your answer. Explain in details what training programs are available for your new franchisees and their staff and what support you are going to be providing them with along the way. Hand over some informational materials for further reading and leave a contact number for any future questions.

• What future equipment upgrades are you planning to have? Your prospective franchisees are aware of the fact that you have an ongoing fee for upgrades and improvements and want to know what they will get in exchange for their money. Even if you do not have such a fee, a future franchisee may still want to know what they will expect in terms of upgrades and in what timeframes. Transparency is the best policy here, even if you do not have planned any technological or equipment upgrades in the near future.

• Why I need to pay an initial franchise fee? Initial fees are, in eyes of people, a great deal of profit for franchisors. As a franchisor you are more than aware of the fact that this is not true. If you have an initial franchise fee, explain that it is there simply to cover your expenses for getting each sale.