Purchasing a franchise is a major business decision which requires an investment of both time and resources. Even after you have decided to venture into franchise ownership, you must still do research to determine which franchise, or even type of franchise, is best for you. One essential source of information for prospective purchasers is the current pool of franchise owners, who can provide you with more objective information than can the franchisor itself.
The best approach when conducting your research is to contact a number of franchise owners, including both those who are successful and those who are struggling. Keep in mind that the most successful franchisees are likely fielding a number of calls from prospective owners, so you should try to be direct and get straight to the point so as to respect their time. Also, you should attempt to contact former franchise owners to determine why they left the business and whether their complaints, if they have any, are based on issues that you believe you can address.
Regardless of the type of franchisee you speak with, there are certain issues that you should always try to raise. Here are three important things you can only learn by talking to franchise owners:
- The true amount of support that you will receive from the franchisor.
Starting a franchise requires a lot of hard work. But the benefit of purchasing a franchise as opposed to starting your own business from the ground up is that you can rely on the franchisor for support. Just how much support that franchisor actually provides can truly only be learned by speaking to franchisees. You should ask specific questions in order to determine the level of support that you can expect to receive when you purchase a franchise. Specifically, you should inquire as to the startup process, as well as the strength of the ongoing marketing programs. The beginning months of franchise ownership can be among some of the most challenging. You should observe whether the franchisor is available to answer your questions, and whether they do so happily or begrudgingly.
As for marketing, most franchises run national or otherwise all-inclusive marketing programs which are intended to benefit all of their franchises as a whole. But do franchise owners believe these strategies are actually successful? Also, do not forget to ask about the training process. If franchise owners felt that they were unprepared to run their business when they first started, then that is an indication that the franchisor’s training program is inadequate.
The overall goal is to determine whether the franchisor is truly invested in your success as a franchisee. At a minimum, finding the answers to these questions can help you determine whether you will receive the support you need to get your franchise off the ground (and to keep it running successfully), or if the franchisor will simply leave you on your own when problems arise. Obviously, the more evidence of support that you can find when you talk with current and past franchisees, the stronger of an investment the franchise will be.
- The investment which will be required in order to get your franchise off the ground.
When you are considering investing in a franchise, the franchisor will provide you with information which indicates the expected range of your initial investment. But only by speaking with current franchisees can you learn whether that range really covers everything that they were required to put into their business to get it started. Also, remember that money is only one type of investment. You should inquire regarding the amount of time they spent working in the beginning, and whether they felt as if their time investment was manageable. For this question, it is best to speak with franchise owners who have or had a franchise in a market which is similar to yours, so as to make the closest approximations as to what you can expect from your own purchase.
- The amount of profits you can expect to receive.
Finally, the question everyone wants to ask–how much money are you making? Generally speaking, you will be provided with earnings information as part of the materials provided for you by the franchisor. But those figures often do not tell the whole story. One important point to remember is that income information is very sensitive. Therefore, you should not simply ask “How much are you making?” as soon as you get the franchisee on the phone. Only ask this question after you have had a chance to ask a few others, and you should take the opportunity to make it clear to the person being asked that you are truly only seeking the information from a professional perspective. Also, you should break down the earnings question into smaller pieces if possible, such as determining their average profit per sale, average number of customers, etc. Do not forget to inquire as to how long the franchisee was in business before he or she started to earn a profit so that you will know what to expect before you purchase a franchise of your own.
By asking these important questions, you can support–or choose to abandon–your plans to open a franchise, knowing that you are making the most well-informed decision possible.