Restaurant Franchise Questions To Ask

As much as a restaurant franchise might help ease you into business, choosing which one to buy is a major decision that will shape the course of your life. For those of you who want to buy a restaurant franchise but aren’t quite sure where to start, look no further-the Synergy Restaurant Consulting Team went out and did the legwork for you. We asked restaurant franchisees, franchisors and industry experts what they consider to be the top questions across all categories, including money and financing, personal satisfaction with the restaurant franchise, finding a business with the right fit, systems, and support issues. To help you on your journey, we’ve compiled a list of the top 10 questions to ask yourself, franchisors and existing restaurant franchisees.

And just to give you one more insight, we even got the inside scoop on how to interpret the answers you receive. So fire away. After all, it’s your due diligence from this point on that will really determine your future success as a restaurant franchisee.

General Question:

Is it a good product or service?
When Luigi Cruz purchased his Beard Papa’s franchise in San Francisco in March 2005, he moved through the process confidently because he fully believed in the product. It was important for him to know that the cream puffs he was basing his franchise on would measure up. Cruz, 44, wanted a product that was unique yet already somewhat familiar to consumers and, most important, had staying power. “A unique product means it cannot be copied easily,” says Cruz, who researched the brand and found that it started in Japan in 1994 and had already expanded to more than 250 stores by 2005. “You have to find out who your direct competitors are and what your market share will be.”

Synergy Restaurant Consultants specializing in supporting the restaurant franchising community and urges potential restaurant franchisees to take the question one step further and inquire: Does the product have consumer acceptance? Is the product or service just a fad, or is it likely consumers will want this product or service for years to come?

Questions to Ask Yourself:

Do I have the skills restaurant franchisees need on a daily basis, and do I have the temperament to follow the directions of the restaurant franchisor when operating the business?
Assessing whether you possess the right management, marketing and communication skills is crucial, says Lisa Ruddy, the first franchisee of The Original SoupMan. You should also possess people skills and be able to make decisions and adapt to change, she says. “It’s important to be able to follow directions because you are part of a system, and consistency is important in restaurant franchising.” Even so, for newer restaurant franchises, this might not always be the case. Ruddy, 38, warns that restaurant franchisees who are buying into less established systems–as The Original SoupMan was when she opened hers in Princeton, New Jersey, in October 2005–need to be proactive about growing their individual franchise and offering suggestions to the franchisor on ways to improve the system.

Do I have the financial means to grow the business and reinvest in it when necessary?
For Ruddy, the spending did not end with The Original SoupMan’s restaurant franchise fee. By the end of the first year, Ruddy had replaced her location’s air conditioning system and improved the menu boards and menus. By year two, she had repainted the store and replaced the tile floor. While these changes weren’t essential to keep the business going–nor are the holiday staff parties or bonuses she offers each year–they were expenses that Ruddy deemed necessary. “Not all businesses make money as soon as they open their doors,” she says. “Sometimes you need to spend money to make money.”

Will the restaurant franchise help me reach my business and personal goals?
This is one of the most important questions to ask, says John Reynolds, president of the Educational Foundation at the International Franchise Association, yet it can only be answered by you. “Having a clear sense of what you want to get out of the business–both financially and personally–helps evaluate the question of how much you are willing to put into the business in terms of personal commitment, time and money,” says Reynolds. “For example, a person who’s retired with a comfortable pension, just looking for a little extra money and something to do a few days per week, is very different from a person looking for a business that will support his family, help put his children through college and provide a big return on his initial investment.”

To what degree does the franchisor exert operational control over the restaurant franchisee?
In general, the word control has a negative connotation; however, when it comes to franchising, it might just be the thing to look for. “Franchisors need to exert control to make sure that the brand promise will be delivered every time,” says Dean Small. “That’s what the restaurant franchisee is relying on. Without it, that franchise may not be delivering the same product or service down the road, and it could ruin their business.” Danny Bendas, a Synergy Managing Partner recommends visiting multiple locations to see firsthand how well the restaurant franchises are being run and ask existing restaurant franchisees about what actions the franchisor is taking to ensure the system is operating consistently from location to location.

Given what you know today, would you purchase this restaurant franchise again?
In a restaurant franchise system, the best source of knowledge may come from past or existing franchisees. They have traveled the road you’re about to go down and have much more inside information about the specific restaurant franchise system than you’ll ever be able to gather on your own. Take advantage of this valuable resource to find out if the restaurant franchisees’ expectations are being met, if their relationship with the franchisor is positive and if the franchisor really has the restaurant franchisees’ best interests in mind, advises Bendas. But use discretion when deciding which restaurant franchisees to call. “Some franchisors have the bad habit of saying, Here is a list of all the restaurant franchisees, as required by the franchise disclosure document, but I want you to call these five,” warns Bendas. “Generally, I don’t care about those five. It’s the rest that I want to focus on.”

What did it actually cost you to develop your restaurant franchise?
How accurate was the information in the Uniform Franchise Offering Circular, including Item 7 about initial investment? Was the working capital identified in Item 7 sufficient for you until you broke even and went cash-positive? When calling up existing restaurant franchisees, be sure to ask them specifically about Item 7 of the UFOC. Even though the UFOC is a document that lays out key investment information and must be provided by the franchisor, the information is not always the most accurate, says Bendas. Consequently, you’ll want to double-check Item 7, which is the franchisor’s estimate of an incoming restaurant franchisee’s total investment. The best way to do that is to ask restaurant franchisees who launched recently. They will disclose whether the listed dollar figures are indeed sufficient to get the business off the ground. “Item 7 is probably the most essential disclosure,” says Bendas. “Usually when businesses fail, it’s not because the product is bad or people didn’t work hard enough. It failed because the owner ran out of money.”

Questions To Ask The Franchisors:

Can you describe the training program?
What kind of practical experience does each of the instructors have in operating the business being franchised? “No matter what incoming restaurant franchisees think they know due to experience in other industries, products, etc., the reality is that they know little or nothing about the specific restaurant franchise,” says Harold Hill, president of Bad Ass Coffee Company, a gourmet coffee franchise based in Salt Lake City. “Therefore, the training program probably becomes the most important tool for them to succeed in whatever restaurant franchise they’re buying.” Expect training that is structured and teaches about hiring, dealing with HR issues, bookkeeping and the overall matrix of the business, says Bendas. Also, take notice of who’s conducting the training. A good training program says Bendas, is one that is led by people who have firsthand experience operating the restaurant franchise and are therefore familiar with all the ins and outs of the business.

Does the restaurant franchisor have the experience and integrity to manage the franchisee?
Becoming a restaurant franchisee means you’re going to be putting your money, time and faith into a particular system, so before you make too hasty a decision, make sure you’re putting your future in the hands of the right people. “You want to look back at the litigation history of management, their experience and their past management performance,” says Small. “Don’t just accept the fact that a system had problems and couldn’t overcome them. Good management overcomes hard problems.” If you can’t uncover a restaurant franchise system’s dirty laundry straight from the franchisor, conduct a search on the internet, advises Small. The extra effort will be well worth it in the long run.

Is the franchisor selective about whom they sell restaurant franchises to, or are they simply selling to whomever is willing to buy?
A telltale sign of whether the restaurant franchise is dedicated to building a healthy, prosperous restaurant franchise system or just wants to make some quick sales is how it goes about finding franchisees, says Small. A restaurant franchise system that sells to anyone who meets certain criteria, that works entirely through a broker network and uses an area representative model to sell restaurant franchises is one that raises a red flag for Small.”You might not meet the president of every single franchise, but you want to meet a divisional head of operations and the training folks,” says Small. “You just don’t want to meet a salesperson. Salespeople are really nice, but they have nothing to do with your long-term business.

For more information about the pros and cons of buying a restaurant franchise, up-front franchisee fees and monthly percentage fees give us a call – Synergy can help you make a sound business decision.