If your preliminary research into owning a franchise has whetted your appetite, then it’s time do the serious research.
In my last franchise columnI talked about the questions you should ask yourself to find out whether a franchise is the right move for you.
Now, it’s time to talk to franchise representatives.
You probably have a lot of questions. You will need a lot of answers. Some of them will come from a franchise development representative.
But the really important questions will come from another source: The current crop of franchisees that are in the franchise system you’re thinking of joining. It’s super-important that you talk to them. They'll have the answers you need.
At a certain point in the franchise discovery process, your franchise representative will encourage you to start reaching out to current franchisees. Most of time, you’ll receive a list of franchisees to call. But, it’s not the complete list. You’ll receive that as part of the Franchise Disclosure Document, or FDD. That’s because the Federal Trade Commission requires all franchisors that are registered in the US to provide the names, addresses and phone numbers of current franchisees as part of the FDD.
I recommend calling some of the franchisees from that list. It’s a good place to start. You’ll get a lot of great information, and at the same time, you’ll get really comfortable asking questions of complete strangers. Just know that the answers you’ll get will be mostly positive.
After you’ve called a few of the franchisees from the franchise development representative’s list, open the FDD, and start choosing random franchisees to call. I recommend calling a minimum of 10-15 franchisees, from different parts of the country. To get their contact information, ask your franchise representative for them, or go to the main franchise website, and look up the franchisees by location. The emails should be there. Once you do connect with them, here are a few questions that you should ask, and why it’s important to ask them;
1. What was your total investment, including any hidden or unexpected costs?
You want to make sure that the figures you’ve been given match up with what franchisees actually invested to start their franchises. You don’t want a $25,000 surprise, right?
2. How long did it take for you to break even?
I recommend asking this question in the third person, so you can avoid coming across as an invader of privacy. Here’s how to ask;
“If one were to purchase this franchise, how long could one expect to get to break-even?”
Notice I didn’t ask the franchisee about his or her break-even point. As a matter of fact, I didn’t even ask the question as the one who needed to know!
Use the third person. It makes things a lot less uncomfortable when it comes time to ask about, “the money part.”
3. Who are the top franchisees?
Find out who the top performers are. Then call them, and ask them why they think they’re so successful. Try to make some friends. Maybe they’ll become mentors for you someday.
4. What led you to your decision to buy thisparticular franchise? What sold it for you?
Asking this question could help you uncover a hidden benefit that the franchise you’re interested in purchasing offers, and it could be one that you would have never known about.
5. What do you wish you knew before you bought the franchise?
Whatever the answer is will give you a huge leg up over someone who didn’t ask this question, and may help you avoid some pain.
Great franchise research will enable you to make an intelligent, fact-based decision on becoming a franchise owner. Call lots of franchisees. They have the answers.
Joel Libava is the author of Become a Franchise Owner! The Start-Up Guide to Lowering Risk, Making Money, and Owning What You Do, Wiley, December 2011.