GO
Loading...

Ask These Questions Before You Commit to a Franchise

Business Mistake
Business Mistake

Guest columnist Joel Libava explains how to get the information you need to make the right decision about a franchise.

Wouldn’t it be nice if the major financial decisions that we’re sometimes faced with came with a money-back guarantee? It would certainly take some of the pressure off!

Unfortunately, we don’t come equipped with clairvoyance. That means we better be careful about fact-gathering.

In my previous post, I presented The Top 10 Things to Know Before Becoming a Franchise Owner.

Now, I’m going to discuss how to get a feel for specific franchise opportunities that you’re starting to explore.

Here are a couple of tips that will help you decide whether you should spend the time needed for due diligence or if you should just move on to some other idea.

Search for Negative Information

Fire up your laptop, go to your favorite search engine and type in the name of the franchise you’re interested in followed by these two words: “franchise lawsuit.” If nothing interesting comes up, try using “franchisee lawsuits.”

One of the greatest things about information-gathering in the Internet age is we can find almost anything in seconds. But just because we have fingertip access to gobs and gobs of information, that doesn’t mean all of it is factual.

I’ve had to do several searches pertaining to franchise lawsuits myself for articles that I’ve written or to share with my clients. One website that always seems to come up is ripoffreport.com

The website is branded as “A Nationwide Consumer Reporting News Agency.” I’ve certainly been able to find some interesting information there. However, there are two things to keep in mind.

Don’t spend more time than you need there, as it can easily become a time-suck, and it’s easy to start reading things about other products or services that consumers are complaining about. Remember why you’re there in the first place.

Verify the information you’ve found. A bit of skepticism is a valuable tool for your tool belt.

When you’re using the search technique described above (and you find something that’s worth bookmarking), do just that: Bookmark it for a later date — when you’re doing deep research. That’s when you can ask the franchisees and the franchise development director about the things that you were able to find.

One more thing: If during your search you find an abundance of franchise lawsuits, things that you feel are serious red flags, don’t bookmark it for later. Voice your concerns during the first call you have with the franchise development director or franchise sales rep. (It doesn’t matter if the lawsuits involve the franchisee suing the franchisor, or vice versa.)

First Impressions Count

Your first contact with the franchise development or sales representative could dictate how your discovery process will go.

In tough economic times, it’s more difficult to decipher if a sales rep is being aggressive out of pressure to make a sale (and keep their job), or if it’s just their personality.

If your first phone call with the franchise company’s representative feels more like an interrogation than a conversation, share your feelings with your representative during the call. The reaction should be telling. In other words, if the representative gets what you’re saying and cools off, it’s usually a good sign — you have someone on the other end of the phone who listens.

On the other hand, if your franchise representative cops an attitude and says something like, “we’re a busy organization, and my job is to quickly figure out if you’re qualified,” it’s definitely time for you to decide how important it is to continue your exploration of this franchise concept. It may be worth it — your representative could be having a bad day, or moving quickly through the sales process is just their style.

In other words, if you feel that the franchise you’re looking into could be a great match for what you want in a business of your own, try to work with this person. I’ve found that almost every time I’ve shared my feelings about something with someone at the other end of the phone, the person almost always steps back and magically transforms into a better listener.

Joel Libava is the author ofBecome a Franchise Owner! The Start-Up Guide to Lowering Risk, Making Money, and Owning What You Do , Wiley, December 2011.

Contact Small Business

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    › Learn More