If you’re considering buying a franchise, then you already know that you need to do plenty of due diligence on the franchisors you’re considering. Not all franchise opportunities are created equal , and it’s up to you, the entrepreneur, to ferret out the one that is a perfect fit.
Here are three more ways you can make a wise decision about a franchisor:
Talk to existing – and former – franchisees
This may be the single most effective way to really get a handle on whether a franchise can be successful, how the franchisor operates, and other essentials of what it would be like to be part of “the system.” UFOCs include the last known contact information for many of these former and continuing franchisees. Reputable and confident franchisors also will encourage you to call as many of these people as you want and help you reach them.
Call as many as you need until you get consistent answers you’re sure of.
“Franchise owners usually have no axe to grind,” says Martin Bahner, a former Siemens executive who now runs the CertaPro painting franchise in Doylestown, Pa. “They don’t want to drag someone else into a trap just because they’re in it.” And on the other hand, failed or booted franchisees can tell worthwhile tales, too.
“Maybe you determine that the failure of that franchise was the guy’s fault, not the company’s,” Bahner says. “In any event, they’re definitely important to talk to.”
Many franchisors have also put together an association of franchisees that often serve as an advisory board; contact some of its members. Very large franchise companies may even harbor an independent group of franchisees who have organized outside the bounds of their relationship with the franchisor, and these bodies can be a great additional source of information about the franchisor. “From the franchisee’s perspective, it’s bad to see that a splinter group has formed, because it usually means there’s a lot of discontent,” says Matt Kreutzer, a Hale Lane attorney.
Size up franchisor management
Sure, you’re an entrepreneur . But as a franchisee, your fate is really tied up with the quality of franchisor leadership and the decisions they make. Google every person who’s in the company’s top management. Expect to have a one-on-one session with the highest levels.
Attend what the industry calls a “discovery day” at the franchisor to get the lowdown on the company and its executives, and to get all your questions answered. Being there will give you both a broad and detailed sense of the company, its facilities, and its values. “If the company is working out of some leased office and a guy and his wife are the management, I would think twice before plunking down $30,000,” says Mark Angstreich, president of Blue Horizon Franchise Group, a franchise broker in Delray Beach, Fla.
And typically, if the event is held in the franchisor’s headquarters city, there will be either company-owned operations or some of its first franchisees operating locations nearby so that you can see how your franchise might work.
Make sure the support will be there
Focus on determining the amount and quality of ongoing support that you can expect from management. The required and available training for you and your employees is one crucial indicator. So is the ease of communications with headquarters.
“There should be a very active program,” says Larry Meigs, CEO and founder of Visiting Angels, a Havertown, Pa.-based franchisor of assisted-living services. “Expect to receive a very detailed description of what you should be receiving from the franchisor, week in and week out.”
Good franchisors embrace this kind of attention from franchisees. “We’ve got our cell-phone numbers right on our business cards,” notes John Hoose, founder of Auction It Today, a Brighton, Mich.-based franchisor of online-auction “stores.” “We know how important it is not to leave franchisees hanging.”
Our Bottom Line
Investigating franchisors can be a time-consuming task, but you’ll recognize the huge payoff when you’ve found the business opportunity of your dreams. Take the time to check out the franchisor and its franchisees , and you’ll be well on your way to understanding the ins and outs of the franchise opportunity .
