Identify the perfect franchise for you! Take our short quiz Take our free franchise quiz!
Identify the perfect franchise for you! Take our short quiz Take our free franchise quiz!
Identify the perfect franchise for you! Take our short quiz Take our free franchise quiz!

Prospective Franchisees - The Financial Questionnaire

As part of their franchisee qualifying process, the majority of well-managed franchise systems conduct thorough background checks of potential franchisees. 

This standard screening process analyzes an applicant's financial resources, education and work experience, and character traits, typically through a series of questionnaires and interviews.

The Financial Questionnaire for Prospective Franchisees

The first qualification considered and investigated is often the prospect's financial situation, so as a franchise applicant you will need to be familiar with the financial jargon that a franchisor may employ in their questionnaire.

Assets

Assets are typically classified as either short-term assets or long-term assets.

Short-term assets include liquid capital, such as cash (funds sitting in your checking and savings accounts), readily sold investments (e.g., any stocks, bonds, or other securities for which there exists a liquid market), and any other assets, like the cash value of your life insurance policy, that can be liquidated on very short notice.

Long-term assets include your holdings that have value but cannot be immediately converted to cash. Examples include long-term holdings in the bank (e.g., certificates of deposit), the value of your home or other real estate holdings, the value of your long-term retirement accounts (e.g., your 401K), the value of your own business, any illiquid equity investments you may have (e.g., your investment in a friend's private business), any notes receivable you hold, and the value of certain other tangible assets (e.g., your automobile).

Liabilities

Liabilities include loans and notes payable, including real estate mortgages, student loans, auto loans, credit card debt, charge accounts, loans against your life insurance policy, and all other indebtedness you may be carrying.

Net Worth

To calculate net worth, subtract your total liabilities from your total assets. This figure provides the franchisor with a good snapshot of your relative financial stability. Consideration is also given to the components that comprise your assets and liabilities - for example, if your total net worth is tied up in speculative real estate holdings, that will likely raise red flags.

Sources of Income

Sources of income can include your salary, annual bonuses, and commissions, as well as income from dividends and interest, real estate income, and other sources.

Financial Statements

As a complement to the questionnaire, the franchisor will often require a credit check and copies of bank statements, paystubs, tax filings or other evidence to confirm the veracity of your financial claims.

Other Questions

Quality franchisors are interested in more than whether the applicant can simply afford the initial franchise fee. They're concerned with the applicant's potential for long-term viability and success within their franchise system.

Thus, in addition to the financial items outlined above, as part of the initial screening process an applicant can expect to receive questions that explore their educational background, their previous places of employment, their motivation for buying a franchise, and their understanding of the franchise model, as well as questions that pertain to their character or personality. To confirm these answers a franchisor may also request personal references.

Why do franchisors ask all these questions? Put simply, a franchise is a long-term commitment by both parties, and the franchisor wants to understand how well the applicant matches the franchisor's notion of the ideal franchisee.

The Franchisee & Franchisor’s Point of View

Many of the characteristics of the perfect franchisee are shared by both a franchisee and a franchisor, but there are also some slight differences. A franchisor is more concerned with how an individual franchisee will fit into their business as a whole, and not necessarily how the single franchise will operate on a day to day basis (although that’s still important to them). Meanwhile the franchisee cares almost exclusively about the success of that individual.

How Sandler Training is Entrepreneur Magazine's #1 Sales Franchise 9 Years Running

Sandler Training offers a distinctive style of training to companies and individuals in the fields of sales, management consulting and leadership development through on-going seminars and workshops. They provide intensive training, a unique lead generation program, on-going day-to-day support and protected territories to help you succeed in business.

5 Ways to Evaluate Your Franchise Options

A great way to go and figure out whether or not the franchise you’re thinking about is the right one for you is to just go into a location and take a look around. Watch how things run. Talk to some of the employees or the customers. Figure out what day to day operations are like. If you have a big problem with the day to day business for any reason then it probably isn’t the right franchise for you. But if you go there and think that the business is great then it’s probably a good fit.