50 Questions to Ask a Franchisor Before Signing
Your Discovery Day checklist — organized by financial, territory, operations, and legal categories.
Discovery Day is the final interview before signing a franchise agreement. You have traveled to the franchisor's headquarters, met the team, and are being shown the best version of their business. This is exactly the moment to ask the uncomfortable questions — not after the ink dries. This checklist covers the 50 most important questions, organized by category, with context on what to listen for in the answers.
Section 1 — Financial Performance (Item 19)
The single most important section of your due diligence. Most franchise agreements are signed without the buyer fully understanding what the Item 19 numbers actually mean or don't include.
What percentage of franchisees are included in Item 19, and why were the others excluded?
Some franchisors exclude new units, underperforming units, or those on renewal. Exclusions can inflate the average significantly.
What is the median revenue, not just the average? What is the bottom quartile?
Averages are pulled up by outliers. The bottom quartile is what you should plan for in your first 2 years.
What does the revenue figure include — gross revenue before royalties and all costs?
Confirm what is being measured. Some franchisors disclose net revenue or 'system sales' which may exclude refunds or transfers.
What is the typical revenue trajectory from Year 1 to Year 3? Do you have ramp-up data?
Most franchises take 18–36 months to reach maturity revenue. Year 1 performance can be 40–60% of the Item 19 average.
Can I speak with 3–5 franchisees who are in their first 18 months of operation?
New franchisees' experience of support and onboarding is most relevant to your situation.
What were the Item 19 figures in each of the last 3 FDD versions? Is the trend up or down?
A declining trend in average unit revenue is a red flag that the system is having trouble maintaining performance.
How does Item 19 performance vary by territory type — urban vs suburban vs rural?
A single system-wide average can hide enormous variance between market types that matter for your target territory.
Section 2 — Territory & Competition (Items 12, 20)
Territory disputes and encroachment are among the most common sources of franchisee dissatisfaction. Get everything in writing before signing.
Is my territory exclusive? What exactly is protected — the geographic area, the customer base, or both?
Many agreements protect a geographic territory but allow the franchisor to open company-owned stores, sell online, or serve customers inside your territory through other channels.
How many territories have been granted in my state and neighboring areas? What is the nearest active franchisee?
Item 20 shows current franchisee locations. Ask for a territory map.
How many territories have been closed, transferred, or terminated in the last 3 years, and why?
Closure patterns reveal whether a territory was economically viable and whether the franchisor supports struggling franchisees or terminates them.
What happens to my territory if I want to expand? Is there a right of first refusal on adjacent territories?
Without a contractual right of first refusal, a desirable adjacent territory could be sold to a competitor owner.
Does the franchisor sell directly to customers through its website or corporate channels within my territory?
Digital sales can directly undercut franchisee revenue in business services, home care, and education categories.
Is there a population or household minimum for territory definitions?
Confirm the territory is commercially viable given the product or service's typical customer density.
How many additional territories are being sold in my market in the next 12 months?
Understanding the planned density reveals whether the franchisor is prioritizing system growth over franchisee profitability.
Section 3 — Operations & Support
The support structure you receive after opening is what separates successful franchise systems from failed ones. Probe specifics, not marketing language.
How many franchisees does each field support person or business coach manage?
One support person per 15 franchisees is reasonable. One per 50 means you will rarely see them.
What does initial training consist of — hours at HQ, field training, and virtual components?
Substandard training (under 2 weeks in most categories) is a predictor of franchisee struggles in year 1.
How do you handle a franchisee who is struggling financially in their first year?
Ask for specific examples. The answer reveals whether the franchisor views struggling franchisees as partners or liabilities.
How has the technology platform evolved in the last 3 years, and what is on the product roadmap?
Technology-dependent categories (fitness, education, automotive) need to know whether they will be asked to fund system upgrades.
What are the mandatory and optional technology or supply purchases — and who earns the margin on them?
Some franchisors earn significant revenue from mandatory supply purchases. This is disclosed in Item 8 but not always transparent.
How many corporate-owned locations exist, and are they held to the same operational standards as franchisee locations?
A high ratio of company-owned to franchised locations can indicate the franchisor is quietly scaling down franchising.
What percentage of franchisees renew their agreement when it expires?
Renewal rate is one of the most honest signals of franchisee satisfaction. Under 70% is a concern; over 85% is healthy.
How does the national marketing fund work — who approves spend, and how are results reported to franchisees?
In poor systems, the ad fund is a black box. Healthy systems provide annual fund reports and franchisee advisory committee oversight.
Section 4 — Legal & Litigation (Items 3, 4, 13)
Item 3 of the FDD requires disclosure of all pending and recently concluded litigation. Read it before Discovery Day so you can ask about specific cases.
Walk me through the Item 3 litigation history — what do the major cases involve and how were they resolved?
Do not accept 'it's a legal matter' as an answer. You deserve a plain-English explanation of the facts.
Have any franchisees filed suit alleging misrepresentation of earnings or territory rights in the last 5 years?
Earnings misrepresentation suits are a serious red flag — they often indicate Item 19 figures have been interpreted misleadingly.
Are there currently franchisees on probation or facing termination, and why?
Item 21 shows terminated/non-renewed franchisees but not those currently in default. Ask directly.
Has the franchise agreement changed materially in the last 3 years? In what ways?
Frequent material changes — especially adding fee categories, reducing territory protections, or expanding company rights — reflect a franchisor exerting more control over time.
What are the circumstances under which you can terminate a franchise agreement without cause?
Some agreements include broad termination provisions that give the franchisor discretion. Know your protections.
Are there any noncompete clauses, and for how long and how broad a geographic area do they apply after exit?
A 2-year, 25-mile noncompete can effectively end your ability to work in your industry after a franchise closes.
What happens to my investment if the franchisor files for bankruptcy or is acquired?
FDD Item 4 discloses prior bankruptcies. Ask what investor protections exist if the brand undergoes a distressed sale.
Have any state regulators required disclosure amendments or issued stop-sale orders for this franchise in the last 3 years?
Some states (California, New York, Maryland) have active franchise regulators. Enforcement actions are a serious warning.
Section 5 — Questions for Current Franchisees
Call at least 10 franchisees independently — from the Item 20 list, not names provided by the franchisor. Item 20 includes every current franchisee's contact information. These questions get the most valuable answers from peers who have no incentive to sell you anything.
Does your actual revenue match what was disclosed in Item 19 for your territory type?
If 5 out of 10 franchisees say their revenue came in 30–40% below Item 19, that is your real benchmark.
What did you wish you knew before you signed?
Open-ended. Let them talk. The most important disclosures often come unprompted.
How does the actual level of corporate support compare to what you were told during the sales process?
There is frequently a gap. Learn whether it is a small gap or a large one.
Have you experienced any territory encroachment — direct, digital, or through company channels?
Encroachment is common and franchisees are sometimes reluctant to discuss it on record, but will tell you one-on-one.
Are the mandatory supply and technology costs in line with what you expected?
Hidden supply costs are a major franchisee complaint in food, fitness, and automotive categories.
If you could do it over again, would you buy this franchise?
Binary yes/no as a first answer, then let them elaborate. Track the ratio across your 10 calls.
Do you feel the franchise agreement fairly balances your rights against the franchisor's interests?
Franchisees who feel the agreement is one-sided rarely succeed long-term.
What is the single most important thing I should negotiate in the franchise agreement before signing?
Experienced franchisees know exactly where the leverage points are. This is the most valuable question on the list.
How to Handle the Answers You Don't Like
The franchisor who answers every question smoothly and positively is not the most honest franchisor — they are the best-prepared sales organization. Listen for evasion, deflection to legal counsel, or hostility to hard questions. A franchisor who responds to "what percentage of your franchisees would recommend you?" with genuine data — including the percentage who would not — is a healthier partner than one who redirects to testimonials.
Any question that receives a "that's confidential" or "you'll see that in the agreement" response deserves a follow-up from your attorney. If the franchisor is unwilling to discuss litigation history, franchisee turnover rates, or territory economics in plain language, ask yourself why.
Getting ready for Discovery Day?
A franchise consultant can prepare you for the specific questions your target brand avoids, connect you with candid current franchisees, and review the agreement for non-standard terms. Their fee is paid by the franchisor.