By Shawn Saraga
Knowledge is the most powerful tool you have when making the decision to invest in a franchise business. Verifying that a franchisor’s outside image matches reality can help you manage your expectations prior to purchasing.
Gaining this information takes work, patience and an ability to ‘read between the lines.’ When you meet with a prospective franchisor, these five questions can be a big help in accomplishing this goal.
1. What are you looking for in a franchisee?
Most franchisors will have you come into the head office to meet the entire team prior to joining the franchise. Look at it from the perspective of a marriage—the franchisor wants to make sure you are a fit with the ‘family.’ This is your opportunity to do the same type of evaluation. If the franchisor replies by listing qualities and traits you feel you can demonstrate, you are likely on the right track.
2. What can kind of support can you offer me?
When meeting with a prospective franchisor, take the time to get an understanding of the different roles within the support system and exactly what they will provide to make your life as a franchisee easier. For example, if you are meeting with the head of marketing, ask him or her how the franchisor’s team comes up with innovative marketing programs that set them apart from competitors. If you are meeting with the corporate trainer, ask about the type of training you’ll be put through and what the franchisor expects from you.
Make sure you feel comfortable with the people you are speaking with; be on the lookout for any personality conflicts you feel might arise between yourself and the members of the support team. Also, ask about their philosophies and approaches to work. Understanding this will be helpful when determining if a franchise is the right fit for you.
3. Where can I find information about your franchise online?
In this day and age, the easiest and most accessible place to find franchise information is online. When asked this question, most franchisors will direct you to their website. When visiting, take note of what the franchisor does (and does not) say about itself. Look for a website that is engaging, user-friendly and accessible. Read the content thoroughly and print off any relevant sections for your future records.
However, your efforts don’t have to end there. After reviewing the corporate website, try entering the franchise’s name into a search engine and see what comes up on first glance. Try different combinations of search criteria. Combine the company name with keywords such as ‘franchisee,’ ‘franchisor,’ ‘feedback,’ ‘positive,’ ‘negative’ and ‘lawsuit.’
Also check out social networking sites, such as Facebook, LinkedIn or X, to see if your franchisor has a presence there. Review any feedback about the brand on chat boards and the customer experience, so you can bring up any concerns about anything you uncover.
4. Are there any current or past franchisees I can speak with?
While the names and contact information of current and past franchisees are included in your disclosure document, it is still worth asking the franchisor about them specifically. Current franchisees can share with you the state of the market at that time and can elaborate on what the current level of support they receive from the franchisor. They can also advise whether they receive value for money given to the franchisor (e.g. royalties, advertising fund contributions, etc.). These existing franchisees should be the best brand ambassadors for the franchisor, and should be able to share with you the ups and downs of franchise ownership in that system. If they are happy, making money and say they would do it all over again, you can feel more confident about the franchise system.
Past franchisees can share with you what it was like to exit the system and whether the franchisor dealt fairly with them. They can tell you if the transfer process was straightforward and whether the franchisor was supportive during the transaction. Ultimately, you want to know how long it took from the time they decided to leave until their actual exit. Past franchisees are sometimes your best indication of what the end of your franchise relationship will be like, if that day comes.
5. How much will I have to invest?
The best question to ask when trying to determine the overall costs involved with franchise ownership is “How much money will it cost in total to build, open and operate the business?” There are a number of costs associated with starting any business. There are hard costs, such as leasehold improvements, and soft costs, such as computer programs and marketing expenses. There are also working capital expenses, such as first and last month’s rent, utilities and various deposits, and voluntary costs, such as fees for lawyers, accountants and professional consultants. These costs add up and may not be included in the overall price the franchisor quotes you.
When the franchisor gives you cost estimates make sure you get them in writing, verify them against your business plan and make any necessary adjustments. The more cost you incur now, the more revenue you will have to generate to recoup those expenses.
Shawn Saraga is the Founder and President of the Franchise Academy. To learn more or book a meeting time please visit www.shawnsaraga.com