Doing Research on a Franchise Opportunity

Author: Wayne Maillet

Date: APR 7th, 2015

Topic: Industry Experts

When one is looking at a franchise it is important that one do the research so that they know what they are getting into. A little homework at the beginning will avoid surprises down the road. You want to go into the opportunity you select with both eyes open.

No franchise is perfect. No opportunity is perfect. Your goal is to uncover the areas that are not ideal and uncover what are realistic income and expense projections in order that you can plan accordingly. Franchisors will assist in you learning about the opportunity. One of the ways that they will assist you is by giving you the names and numbers of the franchisees in the system.

Talking to existing franchisees in the system gives you a different perspective of the organization and the business. It provides you with a perspective from the front-lines; from franchisees who are working in the business directly.

Existing franchisees, for the most part, are willing to share because they have been in the same place where you currently are. They have at one time looked at the franchise opportunity to determine if it was right for them and probably went through the same process and called existing franchisees. They want to provide you with the information that they had sought when they were making their decision. They are also interested in the quality growth of the franchise. They have an interest in insuring that the system grows with quality franchisees that are fully informed.

When calling a franchisee explain who you are and the purpose of the call. Ask the existing franchisee if they could schedule 30 minutes of their time to answer some of your questions. They may be busy when you originally call so you will want to schedule another time when it is convenient for the two of you.

Some key questions to Ask

General

  • What is it that attracted you originally to the franchise?
  • What have you found to be the biggest benefit?
  • What was the biggest surprise once you got involved in the franchise?
  • What has been the success rate of franchisees over the past three years?
  • Who is the most successful franchisee? Why?
  • Who is the least successful franchisee? Why?

Financial

  • How long did it take to get to break even?
  • What was the total investment to get the business started and to the point of break-even?
  • What is your profitability today? Is it what you had expected?
  • What is the seasonality of the business like?

Operations

  • How much time do you spend a week working in the business?
  • How many employees do you have?
  • What has been your greatest challenge in the operation of business? How have you dealt with it?

Support

  • How has the support from the franchisor been?
  • How often does the franchisor visit your business?
  • What additional support would you like to see?
  • Has the training been adequate? How could the training provided by the franchisor be improved?

Relationships

  • How often do the franchisees get together and what is discussed?
  • What disputes, if any, have you had with the franchisor? How were they settled?
  • Are you aware of disputes that other franchisees have with the franchisor?

Summary

  • What is it that you didn’t know that you wish someone had told you before you proceeded with the franchise?
  • Who else would you recommend I talk to?
  • If you were to do it over again would you make the same decision? Why or why not?

Talking to existing franchisees is one of the most reliable ways to get validation of the franchise system you are researching. Be sure to talk to at least three franchisees, or more, to ensure you are getting a broad picture. Recognize that some negative feedback is normal, especially in a young franchise. Nothing is perfect. Don’t use this as a reason to say no to the opportunity. Instead it is a step of doing your due diligence. Determine if you can live with the pro’s and con’s. Determine if the franchisor is actively addressing the challenges and evolving. You can then move forward with confidence knowing that you are making an informed decision.

Start your research today into business opportunities.