Top 10 Questions Franchisors and Franchisees Should Ask at a Franchise Show

Entering into a franchise relationship is a major business decision for both franchisors and franchisees, carrying long-term implications for everyone involved. Each party brings its own objectives, expectations, and responsibilities, making it essential that these are clearly understood and aligned before any agreement is finalized.

Both franchisors and franchisees benefit from approaching the relationship as true partners, emphasizing open communication and mutual respect. Clearly defining roles, responsibilities, and performance expectations from the outset can help prevent misunderstandings and lay the groundwork for a productive, long-term collaboration. Ultimately, the success of any franchise relationship rests on a commitment to transparency, shared objectives, and upholding the standards and values of the franchise system.

The following ten questions are intended to guide both franchisors and franchisees through the key considerations before entering into a franchise agreement. Addressing these topics in advance can help ensure that both parties are well-prepared and positioned for a successful partnership.

1. What Is the Total Investment Required?

Both franchisors and prospective franchisees should ensure that all financial obligations are clearly identified and disclosed. This includes not only the initial franchise fee, but also ongoing royalties, required marketing contributions, and any additional costs that may arise during the course of operating the franchise, such as equipment purchases, leasehold improvements, and working capital requirements. Full transparency regarding the financial commitment enables prospective franchisees to accurately assess the feasibility of the opportunity and supports informed, strategic decision-making from the outset.

2. What Support and Training Are Provided at Start-Up?

Prospective franchisees should clarify what initial training programs are offered to help them start the business, including hands-on instruction, operational guidance, and access to start-up resources. It is also important to know what assistance is provided during the opening phase, such as help with site selection, initial marketing campaigns, and set-up of proprietary systems or technology. Comprehensive start-up support can make a significant difference in navigating the early stages of the business and establishing a strong foundation for future operations.

3. What Are the Key Performance Metrics?

Prospective franchisees should inquire about the financial and operational benchmarks that define success, including average revenues, profit margins, and other relevant performance indicators for existing locations. This information is critical for setting realistic expectations, assessing the viability of the business model, and establishing measurable goals.

Franchisors, in turn, should be prepared to provide transparent and substantiated data to support these metrics, enabling informed decision-making and fostering trust in the franchise relationship.

4. What Is the Franchise’s Litigation History?

Franchisors have disclosure obligations that require them to provide information about past and ongoing litigation involving the franchise system, including historical and pending legal actions. This disclosure allows prospective franchisees to assess any patterns of disputes, the nature of claims brought against the franchisor, and how such matters have been resolved. Reviewing litigation history can reveal potential risks, recurring issues, or reputational concerns that may impact the franchise relationship. Careful attention to these disclosures, and follow-up questions where necessary, are essential steps in evaluating the overall stability and integrity of the franchise system.

5. What Are the Terms of the Franchise Agreement?

A thorough review of the franchise agreement is essential for both franchisors and franchisees prior to entering into any binding arrangement. The agreement sets out the legal framework governing the relationship and addresses key provisions such as the length of the franchise term, renewal rights, and territorial protections. It is also important to examine any restrictions or obligations imposed on either party, including non-compete clauses, operational requirements, and conditions for termination or transfer. Careful scrutiny of these terms ensures that both parties have a clear understanding of their rights and responsibilities, and helps to mitigate the risk of future disputes.

6. How Are Disputes Resolved?

It is important for both parties to understand how disputes will be addressed under the franchise agreement. The agreement should clearly outline whether conflicts are resolved through negotiation, mediation, arbitration, or litigation.

7. What Is the Process for Exiting the Franchise?

The franchise agreement should specify the requirements for selling, transferring, or terminating the franchise, including any associated fees, approval processes, and restrictions on resale. Well-defined exit provisions help ensure that both franchisors and franchisees know their rights and obligations if the relationship comes to an end.

8. What Marketing and Advertising Support Is Available During the Franchise Relationship?

Ongoing marketing and advertising support is essential to the continued success of a franchise. Both franchisors and franchisees should understand what resources and assistance will be provided throughout the duration of the franchise relationship. This includes details about national and local marketing initiatives, required advertising contributions, and the types of support available to drive customer acquisition and maintain brand visibility.

9. What Are the Ongoing Communication Channels?

Both franchisors and franchisees should understand how information will be shared on an ongoing basis, including the processes for providing updates, submitting feedback, and requesting support. It is also important to identify any established forums or platforms for exchanging best practices and addressing concerns as they arise.

10. What Are the Biggest Challenges and Opportunities?

Both franchisors and franchisees should discuss the main challenges and opportunities within the franchise system. It is helpful to ask about common obstacles, such as market competition, staffing issues, or changes in consumer demand, as well as areas where the business has seen growth or innovation. Understanding these factors can help both parties prepare for potential difficulties and identify ways to take advantage of new opportunities as they arise.

Conclusion

A successful franchise relationship is built on more than just a well-drafted agreement; it relies on ongoing collaboration, adaptability, and a shared commitment to the brand’s long-term success. Both franchisors and franchisees benefit from maintaining open lines of communication and being proactive in addressing issues as they arise. As the business environment evolves, the ability to respond to new challenges and seize emerging opportunities will be crucial. By approaching the relationship as a true partnership and remaining engaged throughout the life of the franchise, both parties can help ensure continued growth and mutual benefit.

If you have any questions about your franchising needs, or if you would like guidance on any aspect of the franchise process, please reach out to Mann Lawyers. Our team is experienced in advising both franchisors and franchisees and is available to provide practical, tailored support to help you achieve your business goals.

This blog post was written by Tiffany Mayhew, Articling Student, and  Neil Schwartz, Practice Lead of the Business Law team.  Neil can be reached at 613-369-0357 or at neil.schwartz@mannlawyers.com.