Interviewing Existing Franchisees

When investigating a franchise, don’t forget to speak with franchisees already in the system to get the real scoop.

Interviewing Existing Franchisees

Your most valuable source of information on any franchise system is the existing franchisees. To get the most out of your contacts with franchisees, it’s important that you focus on the right topics and know how to spot the “red flags” that might appear.

You should plan on calling a sufficient number of the existing franchisees to ensure you have a sense of the prevailing attitudes of the group. Though you want to find that the majority of franchisees are happy and supportive of the franchisor, it is also important to try to find any unhappy franchisees as well.

Their perspective will give you a range of input so you can determine what might happen to you if you become a franchisee. You may also want to contact ex-franchisees to find out why they decided to leave the system.

The following list covers the principle areas to research during these existing franchisee contacts:

  1. Initial Training Programmes. You need to determine how well the initial training programmes prepared the franchisees for opening and running their new business. If you hear that the franchisees had many issues they were unprepared to address, that’s a huge red flag.
  2. Opening Support. Find out how easy the franchisor made the process of getting the first unit open and operating. Was there assistance in site selection, lease negotiation, construction and design assistance, financing assistance, permits or any other factors unique to getting this business up and operating?
  3. Ongoing Support. You need to know how effective the ongoing support services of the franchisor are in terms of helping franchisees deal with the problems that come up in the running of their business once their unit is open and operational. If there is no support to help the franchisee deal with changes in the marketplace on a long-term basis, that’s cause for concern.
  4. Marketing Programmes. Most franchisors collect marketing rands from every franchisee to promote the brand. You need to determine whether the franchisees are happy and supportive of the way this process is handled. Note: This is typically the area where you’ll find the most complaints.
  5. Purchasing Power. Does the franchisor use the collective buying power of the total system to get discounts on supplies and inventory beyond what an independent operator could achieve? This factor is one of the biggest advantages of joining a well-run franchise system and offsets much of the fee cost associated with being a franchisee, if the franchise is doing an effective job in this area.
  6. Franchisor/Franchisee Relations. Determine how the franchisees feel about their relationship with the franchise company in general. Is the franchisor supportive, caring, focused on their success, responsive, effective, organised and trustworthy? Make sure the values of the organisation are consistent with your values.
  7. Investment. Use your franchisee discussions to narrow that down to a reasonable and conservative estimate of how much capital you need to be successful in this franchise, based on their actual experience. It’s also valuable to ask something like, “Knowing what you know now, what changes, if any, could you have made to significantly lower your opening costs?”
  8. Earnings. It’s critical that you have a strong sense of just where the average unit is in terms of earnings and how long it took to get to this point. By the time you finish your research, you should know the answers to the following questions: How much money does the typical unit make, given a specified length of time in business? How soon does a typical unit start making money after opening? What is the range of answers for these questions? If you are simply not able to determine these answers to your satisfaction, do not settle. This is a huge red flag, and you need to tell the franchise company that such a lack of information will cause you to decline the franchise.
  9. Ex-Franchisees. Any franchisee who left the system in the past year has to be disclosed. It is sometimes helpful to call people in this category just to see why they left. The answers won’t necessarily be negative, but if they left because it was a bad experience, spend some time asking them about the reasons they felt the opportunity wasn’t right for them.You can then use this insight to help you determine if this is the right franchise for you.
  10. As a final piece of advice, it’s always a good idea to bring up the subject of earnings as the last topic in your franchisee visits. At that point they know you’re not a competitor trying to get information, but rather, a serious prospective franchisee who needs the information to proceed.
Jeff Elgin
About the Author
Jeff Elgin has developed a consulting system that matches pre-screened, high-quality prospective franchisees with the franchise opportunities that best fit their personal profile.

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