One of the most valuable areas of research when investigating buying a franchise opportunity is in contacting the existing franchisee base to find out from "the horses mouth" exactly how they are doing. By asking the franchisor for a complete list of all current franchisees you can then contact a random selection to gain unbiased opinions on how they are finding their franchised business.
Some good questions to ask would be:
- How did they find the initial training?
- How good is the ongoing support?
- Are the claims in the promotional materials realistic?
- How long did it take to recoup their investment?
- What are your earnings and do these live up to expectations?
- Have there been any hidden costs?
- Is you territory large enough to meet your goals?
- Is the franchisor restrictive in their system or is their leeway to expand as you see the opportunity to do so?
Every franchise system has franchisees that are not happy with the system for one reason or another. It could be that the franchisee was not suited to the system they bought into, lacks experience and expertise in running a business or bought into a territory that simply will not support the franchise (too much competition perhaps) so some bad feedback is to be expected. However the majority of franchisees you contact should have many positive things to say and as such you can gain a very good reflection of the franchise you are investigating by contacting them. If however it is the opposite and you are met with complaint after complaint then this should set some alarm bells ringing.
What to watch out for?
Ensure that the franchisor gives you a comprehensive list of franchisees or at least what they have permission to give assuming some may have opted out of being contacted. Being given a small sample may indicate that you are being given a list of the best performing franchises in operation and as such are only going to hear glowing feedback. The franchisees you contact should be a random selection from as complete a list as you can gain so that unbiased feedback can be gathered.
Part 3 will be discussing looking at the past history of a franchise. Knowing the franchisors history can give you a good idea on what the future has to hold for you and your new franchised business.