Franchise Assessment Tool

Buying a franchise is a big decision – and there’s a lot to consider before venturing down this path. This tool can help you evaluate franchise systems, understand what questions to ask as you assess your options and determine if becoming a franchise owner is the right fit for you.

As you go through the questions in this tool, your answers will be presented to you at the end along with tips to help you move forward on your franchising journey. You’ll also be able to export and print out your evaluation, so that you can refer back to it another time.

Is a Franchise Right For Me?

Buying a franchise is a significant investment – both personally and financially. The questions below will help you understand if you're ready for the commitment that comes with being a franchise owner.

  1. Are you the type of person who is willing to follow the rules and procedures of someone else’s system?
  1. Do you agree that the franchisor-franchisee relationship is like a marriage in many respects? (With a courtship period, a ceremony, a honeymoon period, a comfortable period and possibly a divorce).
  1. Are you in a position to put a significant portion of your net worth at risk and, if the going gets tough, able to continue to work hard at your business?
  1. Are you prepared to work longer hours than if you were an employee, working for someone else?
  1. Do you consider yourself to be organized?
  1. Do you believe you have the discipline necessary to look after all the administrative aspects that come with running your own business?
  1. Do you believe you would be able to successfully manage relationships with key stakeholders such as franchise system personnel and your own employees and suppliers?
  1. Would you say that it is important to you to be your own boss?
  1. Do you believe a franchise owner’s efforts should be geared more towards the day-to-day hands on duties of running the business and serving customers, and less towards high-level management?
  1. Do you want to spend the next several years owning your own business?
  1. Are you seeking to buy a business with a proven concept?
  1. Do you see yourself selling and delivering products and/or services, regardless of whether or not you have employees?
  1. Are you seeking to buy a franchise to build net worth / wealth?
  1. A franchise is a license, generally for a limited time such as 10 to 20 years. At the end of that time (subject to renewal options), the franchise expires and there may be nothing to sell. Are you aware of this?
  1. Many franchisors have a say in the resale of the franchise, including the buyer and the price. Are you aware of this?
  1. Are you prepared to be involved in the day-to-day operations of running the franchise?
  1. By definition, an entrepreneurial person is someone who starts, organizes and manages a business, usually with considerable initiative and risk. Would you say that you are entrepreneurial, but still willing to follow an established process and accept guidance on business practices?
  1. Would you like to own several franchised units, as opposed to just one?
  1. Do you have sufficient funds set aside to operate the franchise (and funds to live on, if necessary) until the franchise turns profitable?
  1. Are you in a position to forego regular annual income from your franchise while it is in its early stages?
  1. Have you determined how much you are prepared to invest in a franchise?
  1. Generally speaking, can you afford (and are you prepared) to lose a portion of the funds you have allocated to operating a franchise?
  1. Are you prepared to seek financing to purchase and/or operate your franchise?
  1. Have you explored where you can obtain financing?
  1. Are you comfortable investing your own money and accepting the associated risks?
  1. Have you recently checked your personal credit rating/score?

Is a Franchise Right For Me? Results1

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  • A consistent experience builds confidence in the mind of the customer and is crucial to the success of any franchise.
  • A franchise provides the security of a proven system and following that system will help increase your likelihood of success.
  • Financing requirements can vary greatly by franchise – in some cases, for instance, you may be required to provide up to 50% of the purchase price of the franchise from your own resources. Speak with an RBC Franchise Banking Specialist for more information.
  • Ask the franchisor how to get feedback from other franchisees, as they are the best source of information about running a franchise.
  • Be sure to seek proper legal counsel to help you understand the franchise agreement.
  • Make sure you find out about local competitors in the area where you’re looking to open a franchise.
  • Read our article Is Owning a Franchise Right For Me? 7 Things to Consider to help you understand how your skills, finances, personality and goals line up to what’s required of a successful franchise owner.

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Evaluating the Franchisor

When you’re considering buying a franchise, it’s important to learn everything you can about a franchisor and the franchise system. Every franchise operation is different, so if you’re looking at buying more than one franchise, it’s a good idea to complete this section separately for each franchise you’re looking to buy.

  1. Have you received a copy of your franchise application or agreement?
  1. If you know which franchise you’d like to purchase, have you submitted a franchise application or agreement to the franchisor?
  1. If applicable, have you reviewed the franchise disclosure document?
  1. Do you understand how the franchisor’s legal business entity or entities are structured?
  1. Have all of your questions about buying the franchise been answered to your satisfaction?
  1. If applicable, if you haven’t obtained franchise disclosure documents, will you request this information directly from the franchisor?
  1. Has the franchisor been in the franchise business (selling franchises and running a franchise system) for more than five years?
  1. Has the franchisor been in the franchise business (selling franchises and running a franchise system) for more than ten years?
  1. Has the franchisor been in the franchise business (selling franchises and running a franchise system) for more than fifteen years?
  1. Have you owned and operated your own business previously, whether alone or with others?
  1. Have you previously completed a business plan (i.e. for school or a former business)?
  1. Does the franchise system have one or more key business executives with significant franchise management experience?
  1. “There is a world of difference between running a small business and running a franchise system.” Do you agree with this statement?
  1. Was the franchisor responsible for giving the franchise system its start?
  1. Do the franchisor’s personality and local reputation contribute significantly to the success of their business?
  1. If a franchisee doesn’t possess a similar reputation or personality traits, do you believe they’ll find it harder to achieve the same level of success?
  1. Do you have a positive association with the brand of this franchise?
  1. Do you have business experience related to this type of business, even as a hobby?
  1. Do you have the passion and ability to sell this brand?
  1. Are you willing to hire staff that will compensate for any business or sales experience you may lack?
  1. Have you confirmed that the franchisor or any of its executives do not have a bankruptcy/failure/closure history, whether revealed in the franchise disclosure document or otherwise?
  1. Does the franchisor have audited financial statements (as opposed to “notice to reader” or “review engagement”)?
  1. Do you consider yourself to be qualified to review these financial statements?
  1. Have you engaged (or do you intend to engage) a qualified professional advisor (such as a lawyer or accountant) to assist you in reviewing the franchisor’s audited financial statements?

Evaluating The Franchisor Results1

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  • If a franchisor's start-up costs are higher than their competitors, don't be afraid to ask why.
  • Inquire about the franchisor's plans for future development.
  • Be sure to request the franchisor’s current disclosure documents and engage a legal representative to ensure they fully comply with existing legislation.
  • Find out if the franchisor is a member of any relevant industry trade associations, such as the Canadian Franchise Association.
  • Inquire about the franchisor’s site selection process, and ask about the success rate of these sites.
  • Some franchisors will allow you to work for a short time in an existing franchise, especially if you and the franchisor are moving toward a formalized agreement. This is an excellent way to “try before you buy”, and get a better appreciation for the current business model.

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Engaging Other Franchisees

Engaging franchisees within the current franchise system is an important step in your upfront research. Speaking with other franchise owners will allow you to learn about their experiences, gain a sense for how successful they are and help you evaluate your own potential success.

If you’re looking at buying more than one franchise, it’s a good idea to complete this section separately for each franchise you’re looking to buy.

  1. Do you agree that it is important to speak directly with existing franchisees as part of your evaluation of a franchise system?
  1. Do you feel it is important to speak with both new and experienced franchisees within the franchise system?
  1. Do you intend to speak to other franchisees about their experience?
  1. Have you prepared (or do you intend to prepare) a list of questions to ask franchisees as part of your evaluation of the franchise system? (You’ll be able to view a list of common questions at the end of this evaluation).
  1. Has the franchisor assisted you by recommending which franchisee(s) to contact as you conduct your franchise system evaluation?
  1. Are you comfortable with the number of failed and/or closed franchises in the franchise system you are evaluating?
  1. If any franchisees have recently left the franchise system, have you made an effort to contact those franchisees to learn the reasons for their departure?
  1. Have you found that the franchisor has provided enough initial and ongoing training to its franchisees?
  1. Have the franchisees you’ve spoken with achieved their financial projections?
  1. Are you considering the purchase of an existing franchise unit, as opposed to a new one?
  1. Have you asked the franchisor for at least five years of financial statements for that unit?
  1. Have you considered the need for renovation and other re-investment into the existing franchise unit?

Engaging Other Franchisees Results1

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  • Inquire about franchisees’ day-to-day activities and find out what they like and don’t like about the system.
  • When choosing franchisees to interview, make sure they are either in the franchise system you are considering or running a similar business.
  • Speak with both newcomer and veteran franchisees.
  • Ask about the challenges they have faced, and how they and their franchisor have handled any problems.
  • Be sure to ask about the franchisor’s management style and personality traits. You can find sample questions in the Guide to buying a franchise and on the Canadian Franchise Association site.
  • Don’t be afraid to ask about a franchisee’s financials. It’s important to know if they have achieved acceptable returns on their investment and whether they are happy with their investment.

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