Franchise Discovery Days are performances. The steak dinner, the testimonials from top earners, the polished corporate executives – it’s all designed to make you feel special, like you’re being let into an exclusive club.

It’s not exclusive. They’ll take anyone with a pulse and the franchise fee.

Your job is to cut through the show and get to truth. These 23 questions – asked exactly the way I’m giving them to you – will expose what franchises don’t want you to know.

I’ve watched franchise salespeople stammer, dodge, and outright lie when asked these questions. That’s how you know they work.

The Financial Reality Questions

Question 1: “What is the median net income – not revenue, net income – for franchisees who started in the last three years?”

Not average. Median. Averages get skewed by a few crushing it while most struggle. Median tells you what the typical person actually makes.

What they’ll say: “It depends on the franchisee’s effort and market.”

What you say back: “I understand. What’s the median for those who put in full-time effort? You must track this.”

If they can’t or won’t answer, that tells you everything. They either don’t know (bad management) or the number is embarrassing.

Question 2: “Of franchisees who signed up in 2021, 2022, and 2023, what percentage are still operating today?”

Survival rates by cohort year. This shows you the real failure rate, not the system-wide number that includes 20-year veterans.

Watch for: Vague answers like “the vast majority.” Push for the actual percentage.

I’ve seen franchises with 40% failure rates in the first three years. They’ll never volunteer that.

Question 3: “Can I see P&L statements from five franchisees – your top performer, your bottom performer, and three in the middle?”

Not cherry-picked. The full range.

What they’ll say: “That’s confidential franchisee information.”

What you say back: “I’m not asking for names. Redact them. I just want to see what P&Ls actually look like across performance levels. Surely you have this data.”

If they refuse, assume the middle and bottom performers look ugly.

Question 4: “What percentage of franchisees make less than $50,000 per year in owner income after royalties and all fees?”

This question forces a specific answer about the people who aren’t making it.

The reality: In many systems, 30-50% of franchisees make less than they would working a regular job. They bought themselves an expensive, stressful position that doesn’t pay well.

Question 5: “What’s the total amount I’ll pay in fees, required purchases, and mandatory expenses in year one? Year five? Year ten?”

Not just royalties. Everything.

Make them add it up: royalty, ad fund, technology fees, required vendor purchases, conference attendance, insurance requirements, training, renewal fees.

Run your own math: If they say 8% in fees but required purchases add 4% and technology adds 2%, you’re actually at 14%. On $400K revenue, that’s $56,000/year leaving your pocket.

The Support Questions (What “Support” Actually Means)

Question 6: “How many franchisees does each support manager handle?”

Under 20: Decent attention 20-40: You’re a number 40+: Support is a myth

Divide total franchisees by support staff. That’s your real answer, regardless of what they claim about “dedicated support.”

Question 7: “When I call with a problem, what’s your service level agreement for response time?”

Get a specific commitment. 24 hours? 4 hours? Same day?

Then ask: “Is that in the franchise agreement?”

If it’s not in writing, it doesn’t exist. You’ll be waiting days while your business bleeds.

Question 8: “Can I speak with franchisees who have filed formal complaints against corporate?”

Every system has unhappy franchisees. The question is whether the franchisor works with them or against them.

What they’ll say: “We don’t have many complaints.”

What you say back: “Great. Then it should be easy to connect me with the few who have raised issues. I’d like to understand how those were resolved.”

The Territory Questions (The Hidden Competition)

Question 9: “Define ‘exclusive territory’ exactly. What am I protected from and what am I not protected from?”

“Exclusive” doesn’t mean what you think. Read the franchise agreement closely.

Often it means:

• No other franchisees in your zip code
• But corporate can sell through other channels in your territory
• And national accounts don’t count
• And online customers don’t count

You might have an “exclusive” territory where corporate competes with you every day.

Question 10: “How many total territories exist in my metro area? How many are currently sold? How many more are planned?”

Saturation kills franchise profitability. If they’re planning 40 territories in a market that supports 15, everyone loses.

Follow up: “What analysis determined that number was appropriate for this market?”

Question 11: “Can another franchisee’s marketing reach my customers? How do you handle that?”

Digital advertising doesn’t respect territory lines. A franchisee 20 miles away running Facebook ads will show up on your potential customers’ feeds.

Who owns those customers? Usually, nobody wins.

The Exit Questions (How You Leave)

Question 12: “If I want to sell in five years, walk me through exactly what happens.”

Listen for:

• Transfer fee amount ($5K-$25K typical)
• Franchisor approval requirements
• Buyer qualification process
• Right of first refusal

The killer question: “What percentage of franchisees who want to sell actually find a buyer within 12 months?”

If franchises struggle to resell, that tells you the economics don’t work for informed buyers.

Question 13: “What are my options if this doesn’t work out and I need to exit in year two?”

Nobody plans to fail. But intelligent people plan for failure.

Listen for:

• Early termination penalties
• Personal guarantee on remaining lease
• Non-compete enforcement
• Whether you can convert to independent
• What happens to your customer base

I’ve seen people trapped in failing franchises because exit is more expensive than continuing to lose money.

Question 14: “After leaving the system, what can I not do? For how long?”

Non-competes vary from “can’t operate the same business in a 25-mile radius for 2 years” to “can’t work in this industry at all for 5 years.”

If the franchise fails and you can’t use the skills you developed, you’re starting over from zero.

The Validation Questions (Talking to Real Franchisees)

Question 15: “I want the full list of all current franchisees from Item 20, plus franchisees who left the system in the last two years.”

This is required disclosure. They must provide it.

What they’ll offer: A curated list of their best performers.

What you demand: The complete list. Every franchisee. Every person who left.

Then call the people they don’t recommend. That’s where truth lives.

Question 16: To franchisees – “Knowing everything you know now, would you buy this franchise today?”

Ask this to at least 10 franchisees. Not the ones the franchisor recommends. Random selection from Item 20.

If fewer than 7 out of 10 say yes without hesitation, that’s your answer.

Question 17: To franchisees – “What did corporate tell you that turned out not to be true?”

Not “what surprised you” – that’s too soft. What did they lie about, exaggerate, or omit?

Common answers:

• “Support was much less than promised”
• “Marketing fund doesn’t benefit local franchisees”
• “Required purchases cost way more than they said”
• “Territories are more competitive than they claimed”

Question 18: To franchisees who left – “Why did you exit? Would you warn others?”

Former franchisees have no incentive to sugarcoat. They’ll tell you the reality.

How to find them: Item 20 includes franchisees who left in the last year. But for older departures, Google “[franchise name] franchisee lawsuit” or “[franchise name] complaints.”

The Control Questions (What You Can’t Do)

Question 19: “List every decision about my business that requires corporate approval.”

Pricing? Menu/service offerings? Operating hours? Marketing materials? Vendor selection? Technology systems? Hiring?

Count the things you control vs. the things corporate controls.

If corporate controls more than you do, you didn’t buy a business. You bought a job where you also made a capital investment.

Question 20: “What happens if I don’t follow a corporate directive I disagree with?”

What are the enforcement mechanisms? Fines? Termination threats? Audit visits?

The real question: When corporate makes a bad decision, can you protect your business by deviating from it?

Usually, no. You follow the playbook even when the playbook is wrong.

Question 21: “Show me examples of franchisees who successfully pushed back on corporate policy changes.”

Does the system have any mechanism for franchisee input? Is there a franchisee association with real power?

Or is it pure top-down control where franchisees have no voice?

The Math Questions (Final Verification)

Question 22: “What’s my total investment to get to positive cash flow?”

Not the number in the FDD. That’s the minimum starting investment.

You need:

• Initial investment from FDD
• Plus working capital until breakeven
• Plus your living expenses while unprofitable
• Plus unexpected costs (they always exist)

Get the real number. Double the FDD estimate is often closer to reality.

Question 23: “Let me run my numbers with you: [Present your calculation]. Where am I wrong?”

Build a model:

• Realistic revenue: $____
• Royalty (X%): $____
• Ad fund (X%): $____
• Required purchases: $____
• Operating expenses: $____
• Net to me: $____

Present it to them. Ask them to correct any assumptions.

If they refuse to engage with math, they know the math doesn’t work.

If they show you where you’re wrong, you learned something.

How to Use These Questions

Before Discovery Day:

Email these questions (or a subset) to your franchise contact:

“Before I invest time in Discovery Day, I’d like to get answers to these questions. Can you provide these in writing before our visit?”

Serious franchisors will answer. Ones hiding problems will dodge.

During Discovery Day:

Bring a printed list. Ask questions directly in presentations. Note their discomfort, deflection, or anger.

The questions that make them most uncomfortable reveal the biggest problems.

When Talking to Franchisees:

Call at least 10. Not the recommended list. Random selection.

Ask questions 15-18 to every one of them.

Keep score:

• How many say they’d do it again?
• What themes emerge in complaints?
• What do former franchisees say?

After Discovery Day:

Before signing anything:

1. Have a franchise attorney review the FDD and agreement
2. Build a complete financial model
3. Calculate 10-year total cost vs. independent operation
4. Make your decision with math, not emotion

The Final Test

After all your research, ask yourself:

“Would a sophisticated investor, putting their own money at risk, buy this franchise at these terms?”

Not “does this seem like a good opportunity.” Not “am I excited.”

Would someone who does this for a living think this is a good deal?

If the answer isn’t clearly yes, the answer is no.

Tired of franchise games? Azgari Foundation helps entrepreneurs launch and acquire service businesses without franchise fees, territory restrictions, or corporate control. Keep 100% of what you build. Book a call to explore alternatives.

Frequently Asked Questions

Is it better to buy a franchise or start an independent business?

Independent businesses offer more control, no royalty fees (typically 5-8% of revenue), and flexibility. Franchises provide systems and brand recognition but limit autonomy. For most service businesses, independent ownership often provides better ROI.

How much do franchise royalties cost?

Franchise royalties typically range from 5-8% of gross revenue, plus 1-3% for marketing fees. On $500,000 in revenue, you’d pay $30,000-$55,000 annually in fees—money that stays in your pocket with an independent business.

What are the hidden costs of buying a franchise?

Hidden franchise costs include required vendor purchases at premium prices, technology fees, training costs, renewal fees, transfer fees if you sell, and mandatory upgrades. Total ongoing costs often exceed the stated royalty rate.

Can I be successful without buying a franchise?

Absolutely. Many independent service business owners outperform franchisees because they keep royalty savings, adapt quickly to local markets, and aren’t restricted by franchise rules. Proven business systems exist without franchise fees.

What do franchises provide that I can’t get independently?

Franchises provide brand recognition, operating systems, training, and group purchasing. However, consultants like Azgari Foundation provide similar guidance for independent businesses without ongoing royalties or restrictions.

What’s the failure rate for franchises vs independent businesses?

Despite marketing claims, franchise failure rates are similar to independent businesses when compared apples-to-apples. Success depends more on the owner, market, and execution than whether you’re franchised.

Related Reading

• Complete Guide to Service Business Startup Costs
• Hidden Costs of Buying a Franchise
• How to Get an SBA Loan for a Service Business

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