Talk to Franchisees Before You Join their Club!
Talking to existing franchisees is one of the most important things you can do to investigate a franchise opportunity. Franchisees know the business. They can help you decide if this opportunity is right for you.
Being well informed at the start will improve your odds of success, of course, just as it does in any new job experience. The franchisees are the ones who can tell you the real deal; how well sales strategies hatched by the franchisor really work, what your day will be like, and when you might expect to break even, for example.
You will want to speak with a number of franchisees, preferably some of whom are very successful and also some who are struggling. By reviewing the responses and comparing your own management style to those currently operating stores, you will have a better idea of where you might end up if you purchase this franchise.
Before calling any franchisee you should have read the franchisor’s Uniform Franchise Offering Circular (UFOC), which will give you a wide range of information about the franchise. But getting in touch with franchisees and getting them to tell you what they really think isn’t easy. The UFOC contains a list of current and past franchisees.
Here are some suggestions:
Have a clear idea what you want to discuss. Create a list of questions.
The most common questions to ask revolve around these subjects: Initial Investment, Training, Opening Support, Ongoing Support, Marketing Programs, Purchasing Requirements, Purchasing Power, Earnings, ROI etc.
First ask yourself, “What do I want to know?”
Here are some suggested questions to ask franchisees choose the questions that help you answer the question “What do I want to know?”
How has the franchisor responded to your calls for support about business operations or any other general questions you may have had?
- Do you feel the franchisor cares about your success and is willing to help you as needed?�
- How would you describe your overall franchisor/franchisee relationship?�
- Did you receive assistance in site selection, lease negotiations, build-out and permit processes, or any other areas unique to the opening of the business?�
- What happens in a typical day?�
- What will go wrong?�
- How long did it take for you to realize a return on investment?�
- What are your approximate earnings and are they in line with your expectations?�
- Did the franchisor adequately estimate the amount of operating cash that you needed?�
- Was the training the franchisor provided thorough and did it sufficiently prepare you to run this business?�
- Were there any hidden fees or unexpected costs?�
- Is your territory big enough to hit your goals?�
- Are there restrictions on the products you sell and use in your business?�
- Are you required to use designated vendors?�
- Does the franchisor advertise as much as it said it would?�
- What type of business experience, education and skills did you possess before buying this franchise?�
- Why did you select this particular franchise system over others in the same type of business?�
- Did the training only cover the operating system or did the training prepare you to compete with other businesses providing similar products or services?�
- Did you encounter any problems with the franchisor, the site, or establishing your business and how did the franchisor respond to problems?�
- What are your sales patterns like? Are they seasonal? If so, what do you do to make ends meet in the off-season?�
- Are there expansion opportunities for additional franchise ownership in this system?�
- Knowing what you know now, would you make this investment again?�
- What are your thoughts on this industry, the products and/or services available, and what trends do you see happening for the future?�
- Do you have any issues or concerns with the franchise agreement? Were there any clauses that stuck out over others that may impact your relationship with the franchisor?�
- Has the franchisor responded to any of your own ideas about improving the franchise system?�
- Are there any other franchisees or former franchisees you recommend I contact?
Questions to ask former franchisees:
- Why did you leave the franchise system?�
- Did the franchisor cooperate in helping you sell your franchise?�
- If there was a termination or non-renewal, did the franchisor explain why and provide a reasonable opportunity for you to cure the problem?�
- Would you consider buying a franchise from a different franchisor?�
Franchisees’ view of the franchisor and the value of the franchise system will be enlightening. Make sure you interview a reasonable sampling of franchisees; I would suggest no less than 5. Some will have good experiences to report; others may preach doom and gloom.
Remember, no one can predict how you will fare or whether you’ll enjoy the business, but you need to know the mood and understand the mindset of the existing owners before you join their club.
Jim Coen, Mr. Franchise
I have learned franchising from the ground up. I’ve been a franchisee for a bad franchisor. I’ve worked for good franchisors and I’ve worked for marginal franchisors. I’ve helped many franchisees succeed.
I provide a consulting process that saves you time and money in your franchise search and provides you with the tools to make the right choice for you and your family.
Call: 617-469-3002
Comments
[...] Cross Posted at Let’s Talk Franchising similar posts:10 Common Mistakes of Prospective Franchisees [...]
Jim,
Nice list for potential new franchise business owners to use.
I will add one really important thing to the list:
If you are ONLY calling franchisees to find out how much you can make, they will sense and resist. Get to know them with some of these other questions first.
Establish a bond!
Franpro
Jim;
The question here is how to make this both effective and representative. Many franchisees are not going to answer, and the ones who do will have an axe to grind one way or another.
I would approach the franchisee association or advisory council first to get some insight on how the collective felt about the positives and negatives.
Michael,
I agree not all franchisees will answer all questions objectively. Though the subjective answer can sometimes be very revealing.
Franchisee Associations and Advisory Councils are good places to obtain information and gauge the collective sense of the franchisees.
I advocate for candidates of a franchise to go visit the franchisees at the franchised business, meeting face to face with a franchisee is one of the best ways to judge their feelings about the franchises business.
I’ve advised candidates that when neccessary it is worthwhile to get on a plane and visit franchisees to validate the opportunity.
Interesting discussion, however, franchisees are often intimidated or told not to respond to inquiries. As for calling open franchisees, first find out how new they are - if less than a year old, they tend to believe any hipe their franchisor gives them, and will most likely repeat it to you. Many are afraid to let you know when they are not doing well. Try calling closed stores, however franchisors quite often list them incorrectly or not at all on the UFOC. WHY franchisees close is a VERY important question! Speak to 5-10 of them at least, and remeber they do not ALL have an axe to grind. Previous owners (transfers) are a good source too.
Regarding Associations-most BAD franchisors do not want their franchisees really talking to each other, so there are no organizations other than the Corp controlled ones-THIS IS A DEAD GIVE AWAY that the franchisor has issues!
Most likely NOONE will talk money, so go to work for one of them for a week or so to get a real feel.
Good luck!
[...] Cross Posted at Let’s Talk Franchising [...]
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