1. Make sure you visit franchisees at a good time of day
If you show up at a fast-food restaurant at noon, don’t expect to get anyone’s full attention. By all means, arrive at noon, watch the operation during the lunch hour, and arrange to see the owner later that day when things quieten down.
2. Use the visit to follow up on the information you read in the franchise disclosure document
As lengthy as that document is, it still doesn’t tell the whole story. You have to piece that together for yourself. Bring a list of questions when you visit franchise owners.
Some questions you may want to ask include:
- Was the training the franchisor offered helpful for launching and after?
- Is the franchisor responsive to your needs?
- Tell me about a typical day for you.
- Have there been problems you didn’t anticipate?
- Has your experience proved that the investment and cost information in the disclosure document was realistic?
- Have you incurred any hidden expenses?
- Are the advertising fees reflected in the marketing support (for example, local advertising or in-store signage) that you receive?
- What are your sales patterns like? Are they seasonal? If so, what do you do to make ends meet in the off-season?
- Have your sales and profits met your expectations? Tell me about the numbers in the business.
- Are there expansion opportunities for additional franchise ownership in this system?
- Knowing what you know now, would you make this investment again?
- Describe your experience and relationship with the franchisor once you signed the franchise agreement and through your first year of business.
- Don’t be scared of sensitive topics. Ask questions like: “What conflicts do you have with the franchisor?”
3. Talking to franchisees can also give you something you won’t get anywhere else: A feeling for what it’s like to run this business day-to-day
Thinking solely in economic terms is a mistake if you end up with a franchise that doesn’t suit your lifestyle or self-image. When you envision running a restaurant franchise, for instance, you may be thinking of all the money you’re going to make. Talking to franchisees can bring you back to reality – which is a lot more likely to involve manning a fry station, disciplining employees and working late hours than cruising around in your Ferrari.
4. Buyers should spend at least one week working in a unit
This is the best way for the franchisor and franchisee to evaluate each other. Offer to work for free. If the franchisor doesn’t want you to, you should be sceptical about the investment.
5. When all your research is completed, the choice between two equally sound franchises often comes down to your gut instinct
That’s why talking to franchisees and visiting locations is so important in the selection process.