Franchisors are usually eager to encourage prospects to speak to franchisees and sometimes they will attempt to direct the process, even though that’s technically against the law. A franchisor can’t tell you who not to talk to. That doesn’t mean the franchisor won’t try to influence who you talk to.

Who should you interview?

When you receive the Franchise Disclosure Document, you’re armed with a list of existing and past franchisees and you should contact them randomly as well as purposely. For example, you might call every 10th franchisee, and in addition, you might find out which franchisees are similar to you in both background, skills, and size of market, and purposely interview them.

My list of 92+ Questions To Ask Before You Invest In A Franchise will be helpful to you . . . it’s been downloaded (or mailed) to countless thousands of franchise prospects through the years, and distributed at many expos, too.

Ask the same questions of all franchisees

It’s a good idea to ask the same questions of all the franchisees you interview — you’re not going to ask 92+ questions, but there will be at least half a dozen that you’d want to ask each franchisee. For example: Given the chance to buy the franchise again, would you do so?

Expect to get double talk

In spite of your best intentions and planning, you’re going to get some double talk from franchisees. Experts like Jeff Johnson at the Franchise Research Institute refer to it as “false positives” and “false negatives.”

It’s difficult to avoid double talk.

Franchisees often suspect that their franchisor is paying attention to what they say to prospective franchisees. Franchisors have been known to ask prospects, “Who told you that?” when prospects report that they heard something negative about the franchise or the franchisor. If a franchisee thinks their feedback will get back to the franchisor, they’re not likely to tell the truth, especially if the truth is negative. if they think there will be consequences for telling the truth, they’ll respond to a question with a “false positive.” Instead of telling it the way it is, they’ll fudge a bit to say that something is “pretty good” or “okay” when it’s actually not.

Perceived competition produces double talk

On the other hand, some franchisees want to avoid what they perceive to be competition from other franchisees. So when a prospect calls a franchisee in Detroit, for example, and the franchisee thinks the prospect wants to open a unit in a nearby market, the franchisee is likely to respond with “false negatives” about the franchise opportunity. They’ll do everything they can to dissuade another franchise from opening in their territory.

You really can’t do much about the double talk, except interview more than just a couple of existing franchisees. When franchise prospects tell me that they talked to one or two franchisees it always makes me nervous because they’re limiting their ability to get to the truth. If you studiously interview multiple franchisees, i.e. a dozen, and you track their answers to your specific questions, you can improve your chances of cutting through the double talk.

One way to avoid the double talk

Jeff Johnson will tell you that you can avoid the double talk by investing in a world-class franchise company. And he knows who they are because he’s identified them after surveying their franchisees. His survey includes almost two dozen questions that will filter out the double talk and get to the truth about a franchise opportunity.

Unfortunately, most franchise companies have not submitted to Johnson’s survey. Many are fearful of what their franchisees would report. But there are currently 21 franchises that have won the designation of certified world-class company. Now that’s not reason enough for you to buy one. You should buy one only after you’ve done your due diligence and determined the franchise company makes sense for you. If it comes with Johnson’s world-class designation, you can feel that much more confident that you’ve avoided the double talk.

. . . I addressed these issues in greater detail at the Behind The Numbers blog, posted on the site of the Franchise Research Institute.

Impressively, one franchisor has tackled this issue by appointing a senior executive to build relationships with lenders. John Teat is the managing director of franchise finance for Primrose Schools. I recently interviewed him for the Texas Franchise Leadership Tele-Forum. Here’s what he recommends that franchisors do. Find out how well your franchisor meets these criteria!

1. Today, franchisor/lender relationships are absolutely critical. While it’s location, location, location in real estate, it’s relationship, relationship, relationship in franchise financing. It’s who you know, and the franchisor that doesn’t have a network of bank and lender relationships isn’t in a position to help franchisees get funding. . . . Who are the franchisor’s lenders?
2. The franchisor should set up an initial meeting with the lender and plan to ask questions about the lender and the bank. Learn about the lender’s credit culture. What’s their “put thru” system like? Lenders are impressed by franchisors who want to know about their needs. . . . What can the franchisor tell you about lenders who will consider your application for funding?
3. Franchisors must ask for the lender’s assistance. Create a team spirit with the lender and work collaboratively to put together a funding plan for your brand. Get the lender involved in your business! Invite the lender to your office; to your conferences. . . . Can the franchisor introduce you to lenders?
4. Once the franchisor has a program in place with a lender, it’s important to send the lender only prospective franchisees and existing franchisees that meet the criteria for the program! The worst thing the franchisor can do now is to send the lender a candidate that doesn’t qualify. . . . What are the criteria for qualification? Has the franchisor explained them to you?
5. Franchisors must stay on top of the “put thru” system with the lender. Remain involved. The lender will look to the franchisor for help. . . . What can you expect the franchisor to do to help facilitate this process for you?

If you’re investing in a franchise that includes equipment, such as a POS system, or fryers and ovens for the kitchen, or if you need a vehicle, such as a van or panel truck, you may be well advised to lease rather than to take out a loan. Leasing equipment is the equivalent of “renting” the equipment, which means that you won’t take money from your working capital to buy the equipment. With a lease, you set up a monthly payment, and at the end of the lease you can acquire the equipment, or upgrade it and roll the package into another lease.

The advantages of a lease include:

• Preserve your working capital. Nowadays it’s important to keep cash on hand rather than use it to buy items that could be leased.
• Claim a tax benefit. Section 179 of the U.S. Internal Revenue Service Code allows you to write off a percentage of a monthly lease payment. The law frequently changes, so it’s important to consult with a tax advisor before claiming this benefit.
• FICO requirements are usually lower for leasing.
• There are no prepayment penalties.
• You can choose the terms: 24 to 60 months.
• If you’re “corporate worthy” (you’ve been in business at least five years) you may not have to sign a personal guarantee.
• If you own an existing business and you’re opening a second unit of that business, you may be able to use the first business to guarantee the lease, and you won’t have to sign a personal guarantee.
• Closing costs are minimal: almost always less than $500.

There are few disadvantages to a lease, although no one will argue that if you’ve got the money, and can afford to spend it, then it’s less expensive to buy products outright and save the interest. Few people are in that economic situation, however.

Securing a lease may be faster than securing a loan – especially if you’re leasing an equipment package, software, a POS system, or a vehicle that’s recommended by a franchisor that’s well known to the lender. But you will still need to provide personal financial information and provide a variety of documents to the lender.

Join This Coleman Webinar:
The New Normal For Franchise Financing

Wednesday, March 17, 2pm ET. Join Bob Coleman, John Hayes, Geoff Seiber and Bob Rodi to learn more about how you can get the funding you need now to buy a franchise. Register at Coleman Publishing.

Why is it that some franchisees do well, while other franchisees in the same brand fail?

“Heart” he answered.

By my look he could tell that I was waiting for some elaboration.

Some elaboration, please?

“Heart” he said again, a little louder.

“Okay. . . . what about heart?”

“They have it or they don’t,” he said. “Most don’t.”

Again I waited. For a guy with so much experience, he didn’t seem to have much to say. At least not much to say on this topic, even though he said he wanted to talk about it. He wanted to help people save themselves from failure in franchising.

I took a drink of my coffee. He drank more of his.

Can you predict ‘heart’?

I decided to take another approach: “How do you spot the people who have heart?”

“You can’t,” he said.

I stared.

He added, “Nine out of ten people talk about it, but they can’t deliver.”

Another drink of coffee. He was loosening up now!

Those with ‘heart’ don’t whine

“You don’t know which franchisees have heart until things really get tough and they don’t give up. If they cry and whine and blame other people, you’ve got your answer. There’s not much chance those franchisees will ever succeed, and you’d be wise to help them out of the system. I hate to be crude, but if they dump their (crap) all over you, they’re going to fail.”

There you have it: The secret to a franchisee’s success from a guy who actually knows.

Do you have heart?

It’s another way of asking: Do you have passion?

Remember, my subject said most people don’t have it. Are you sure you do?

It would be good to be sure before you invest in a franchise. Because it takes heart to succeed!

eBook Coming Soon:

Help Your Banker Say Yes! How you can secure financing to buy a franchise. Reserve your personal copy now!

How many more franchisors will take this same approach? Dozens! Particularly if they want to start selling franchises again in record numbers. If you’re planning to buy a franchise in the next several months, you may benefit from a similar finance program.

Record sales in 2009

Franchise financing isn’t anything new — The Dwyer Group has provided it for several decades, which is part of the reason the company will sell more than 300 franchises in 2009. But now more franchise companies will provide financing because they’re tired of slow-growth and dependence upon the U.S. Government to kick the economy back into gear.

Jaws fell open

Jenkins championed the finance program at Money Mailer and was thrilled when the company announced it at a franchisee convention earlier this month. “When our franchisees heard about it, I’d say there were about 300 jaws that fell open. We’re all very excited about it.”

Excited because he anticipates the company’s lead flow to multiply times four. In less than a week after the finance package was announced, Jenkins said he had received more referrals from existing franchisees than he normally gets in a year! Once the public learns about the program, inquiries will skyrocket.

A $7,500 down payment

While a Money Mailer license costs $37,500, qualified candidates will now be able to join the franchise company with a $7,500 down payment. Money Mailer will finance the balance and not require payments from the franchisee for two full years. The company will also provide a “launch package” that includes $20,000 in production credits paid to the new franchisee in the first year.

Until the economic downturn, franchise candidates frequently used a home equity line of credit to finance a Money Mailer franchise, but that option ended many months ago. “We had to control this situation (the lack of financing) to ensure our growth,” Jenkins explains, “and our management team decided to put this finance program in place. It will make a dramatic difference in 2010.”

Indeed it will, just as similar packages will make huge differences for other franchise companies providing they are bold enough, and financially stable enough, to provide financing to their qualified candidates.

eBook Coming Soon:

Help Your Banker Say Yes! How you can secure financing to buy a franchise. Reserve your personal copy now!

“Not long after I lost my job, a friend told me about this franchise. I looked into it and bought one.”

It may surprise you, but that’s how — and why — many people buy franchises!

Here are some other reasons that I’ve heard when I’ve asked people, “How’d you decide to buy a franchise?”

Crazy Excuses

“I decided I wanted to work for myself, not someone else.”

“A franchise broker showed me a half dozen concepts and I liked this one best.”

“It’s the ‘hottest’ business to be in right now and I wanted one.”

“My father told me it was a good business and he put up the money.”

“I had money in my 401k that I could rollover into my own business and I decided now was the time to do it.”

“One weekend I went to a franchise show, where they had many different businesses displayed, and I got to talking to a franchisee of this company and she told me that I should buy one. I did some research and decided she was right!”

And here’s the point

I could go on . . . but what’s the point?

Well, the obvious point to many readers is this: Those are all wrong reasons for buying a franchise. In fact, those aren’t reasons, they are crazy excuses. And they almost always lead to grave disappointments.

When people buy franchises for the wrong reasons — excuses or not — they usually live to regret it. Often times, it wasn’t the “hottest” business, and even if it was, the franchisee wasn’t cut out to own a business, with or without daddy’s money! Often times, these businesses fail and the franchisees lose their investments. Google will lead you to countless ugly stories about franchise failures!

3 questions you must answer

If you want to avoid becoming a sad statistic in franchise history, there are three questions you must positively answer even before you investigate a specific franchise concept. In fact, answering these three questions can keep you from spending time and resources looking at the wrong franchises, and they will ultimately help you invest in the right franchise, providing that buying a franchise is the best thing for you. (It’s not for everyone).

Frankly, it amazes me that so many people buy franchises without knowing these three points of information! But apparently, no one told them this information is important. (Or, maybe they’re okay with using crazy excuses!)

So here we go:

Know the success profile

1. Do you know the profile of a successful franchisee?

Do you know the values, skills and behaviors of successful franchisees? They’re not necessarily the same as the traits of a good employee, for example, or a good vice president or CEO. Just because you excelled in your Fortune 500 job, or you were Teacher of the Year, or a real estate tycoon, it doesn’t mean you’ve got what it takes to become a successful franchisee.

Oddly enough, many (and maybe most) franchisees can’t confidently explain the profile of a successful franchisee in their own franchise network! Some think they know it, but they’re not sure. Others say they know it, but they can’t prove it. Only those who are successful can be sure they’ve got it, but that doesn’t necessarily mean they can explain it!

Valuable advice: Even before you think about writing a check to pay a franchise fee, you need to be absolutely certain you can describe the profile of a successful franchisee in that specific franchise network.

Be sure you got it!

2. Do you possess the profile of a successful franchisee?

Do you have what it takes personality wise?

Do you have the values, skills and behaviors of successful franchisees?

Caution: Most people do not!

If you say you do, what makes you so sure? . . . And just to push the point — because, after all, we are talking about you risking tens of thousands of dollars when you buy a franchise — why should anyone believe you?

Better yet: Why should a lender believe you? (It wasn’t true a couple of years ago, but today your lender will want to be convinced of your chances of success before approving your loan).

And now the obvious question: Why should a franchisor believe you?

Obvious but, sadly, not necessarily part of the franchise buying process. Many franchisors won’t care about your profile. They won’t ask about it because they don’t know it’s important. Or, they just need to sell franchises — it doesn’t matter to whom. Even some franchisors are okay with crazy excuses.

Match it to the business

3.  Does your profile match the profile of the successful franchisees in the business you intend to buy?

This question is the most important of all. Let’s say you’ve identified the profile of a successful franchisee and you know you’ve got the same profile.

But for which franchise?

There are at least 2,000 — maybe 3,000 — franchise companies in North America. They’re all different. They don’t all require different profiles, but many do. For example, a successful franchisee in the hair salon industry, just to pick an industry, may fail in the hospitality industry, or the lawn care industry, just to pick two more. He may fail because he doesn’t have what it takes to succeed in that different industry. (Personality is by no means the only requisite to success — there are other considerations, including access to capital, location, and common sense, to mention a few).

Another ugly statistic

There are more than 75 different industries that use franchising as their method of distribution. So matching a success profile to an industry, and ultimately to one franchise company, is critical. Miss this and you’ll likely become one of those ugly franchise statistics.

Critical question: If you can’t define your own success profile and know that it matches the success profile for franchisees in a specific franchise company, why would you invest in that franchise?

I hope you said you wouldn’t!

Getting the answers you need

By now you may be asking: How do I find out which success profile matches which franchise company?

Answer: Ask the franchisor!

When you talk to a franchisor, and you’re about to make a buying decision, ask the franchisor to show you, or explain to you, the success profile for his or her top producing franchisees. Then, ask for the names and profiles of the top ten franchisees. You want to talk to them!

Ask the franchisor: What is the dominant personality profile of your top ten revenue-generating franchisees?

You’re not asking for an earning’s claim, so don’t let the franchisor duck your question. You’re not asking for revenue amounts, you’re just asking for a list of the top ten producers. You’re asking for non-financial information, which is absolutely essential for you to determine if you should invest your money in this franchise!

Reality: The franchisor may not be able (or may not want) to help you. As unlikely as this seems, many (maybe most) franchisors simply can’t provide the information you need! Some will tell you that profiles are not important, they don’t matter, and the company does not profile its franchisees. Others will say they’ve never profiled their franchisees and — they won’t tell you this — they don’t want (or they can’t afford) to invest the money to do so! Some won’t share the information with you because it’s not favorable to your buying decision!

Now what?

Ask those who know

Ask a company that profiles franchisees! Dynamic Performance Systems and Franchise Navigator are two that I suggest you check out. The latter features a new tool called Connect Me, which does the profile matching for you! Last I checked, more than 14,300 prospective franchisees had used this service!

More and more franchisors — especially those that care about the welfare of their franchisees (and the long-term viability of their brands) — are profiling their franchisees, and they will provide the answers to these critical questions because prospective franchisees, like you, are getting smarter. You’re demanding the answers. And you’re not going to settle for crazy excuses!

Demand to get what you need to make a good buying decision — the franchisors that want to sell franchises will comply with your requests.

Photo image by: Shmoomeema

Marketing machines

Major issue today: marketing!

I frequently speak to franchisees who represent many different businesses, and the overriding concern today among those who are failing, or struggling, is marketing.

• Where are the leads?
• Where are the customers?
• How do I get more customers?
• How do I keep my customers?
• How do I get customers to spend more money in my business?

Those are the questions and issues facing far too many franchisees today, which is why marketing is the most important component for you to evaluate prior to buying a franchise.

Some franchisors haven’t figured it out

Unfortunately, many franchisors either don’t know the importance of producing a marketing machine or they can’t afford to. Sometimes, in fact, the franchisor hasn’t figured out a marketing scheme, and their franchisees are in the worst situation. The saving grace may be that all these franchisors aren’t selling many franchises these days! Not all bad when you consider that they’re likely only to produce more unhappy franchisees.

Franchisors are easily distracted

It’s easy for franchisors to overlook the importance of marketing to their franchisees because there are so many other things that compete for a franchisor’s time and money: Selling franchises (well, duh!), training and support, site construction, managing the corporate team, funding the business, dealing with vendors, etc. When franchisors forget (and some just don’t know) that marketing propels franchising — that nothing is more important than marketing, especially to a franchisee — they fail to live up to their responsibilities as franchisors.

Protect yourself by not buying their franchises!

You want a franchisor to invest in marketing

Franchising is in a mess right now because too few franchisors are marketers, and too few franchise companies are providing marketing machines for their franchisees. And things aren’t going to get better until franchisors begin to invest again in marketing.

Look for the marketing machines . . . they’re out there! Ask existing franchisees: How effective is the franchisor’s marketing machine? If the franchisee looks at you like you’ve got two heads, you know to continue shopping! Don’t believe anyone who tells you that everyone is struggling to sell franchises today. Not true. Franchisors with marketing machines are doing just fine, even in these troubled economic times.

If you expect to do just fine as a franchisee, only buy the franchise that come with a marketing machine!

Just Released: FranchiseMastermind Interview Series

As you consider buying a franchise, learn from the franchise masters! Dr. John Hayes interviewed several of the most successful franchisors. Find out how they created successful franchise systems — follow their advice as you seek a successful franchise of your own. Learn from Don Dwyer, William Rosenberg, Jim Amos, Jim Bugg, JoAnne Shaw and others! You can immediately download and listen to their interviews. Click here

.

Isabel is back!

Yep, it’s Isabel again. On a rampage again, too. I love it when she’s angry because she pushes me right to the edge. Much better than dealing with a client who is afraid to challenge the franchisor; afraid to ask difficult questions.

All those promises

Isabel had just read Item 9 — Franchisee’s Obligations — in the Franchise Disclosure Document (FDD) given to her by a franchisor. “It’s several pages long!” she complained. “They not only tell me when I have to open and close the business, but what I have to wear, how I have to act, how much advertising money I have to spend, and the volume that they expect me to produce every year! Not only that, they put restrictions on the products and services that I can sell!” (The latter referring to Item 8 of the FDD).

Isabel didn’t think it was fair. Especially not after reading Item 11 — Franchisor’s Assistance. “That section is about a paragraph long,” she shouted. “They don’t promise to do much of anything for me, but they certainly plan to keep me busy and keep my hands tied, too.”

“Not funny,” she admonished

When I laughed at her last comment Isabel didn’t appreciate it. “It’s not funny, John. I’m so close to buying this franchise, but I don’t understand why they are making it so lopsided. Don’t they want me to become a franchisee?”

I apologized, but then I got right to the point to give Isabel her money’s worth.

Getting the straight scoop early

“Look,” I said, “would you rather they tell you what’s expected of you after you buy the franchise?”

“Of course not,” she said. “I want to know upfront what’s expected of me.”

“Well then, that’s what you got,” I continued. “They told you what you’re expected to do. And they expect these things of you — hopefully — because they know these requirements will help you build a successful business. I say ‘hopefully’ Isabel because not all franchises are created equal. Some of them don’t know what they’re doing. It’s your job to select one that does know what they’re doing. In which case, they won’t have you jumping through hoops just for something to do.”

Franchisor doesn’t promise much

“Well from what I can judge,” she shot back, “they don’t do much. This franchisor doesn’t make any promises other than to train me and provide support and a few other things. However, when I talked to them about Item 11 they told me they’ll actually do more than they promise. I don’t know if I believe them.”

“I don’t blame you,” I said. “However, look at it from their point of view. If they make promises that they can’t keep — even through no fault of their own — what’s likely to happen?”

“They’ll get sued,” she said.

Under promise, over deliver

“Exactly! . . . Remember, once you’re a franchisee it’s important to them to keep you happy. But until then, it’s better to promise a little and then deliver a lot. ”

“Yea, well that’s what they told me they’ll do. But when I told them I want it in writing, they said that’s not going to happen.”

“It won’t,” I continued. “They’re not going to change their FDD just for you. But Isabel, I think you’re making too much of this.”

“How so?” she wondered, now in her cordial voice.

Do your homework

“Well, it’s no different than what we’ve talked about in the past. You don’t take anything the franchisor says at face value. You owe it to yourself to validate it. And how do you do that?”

“Ask the franchisees!”

“Very good,” I said. “You’re a terrific student.”

“So when I interview franchisees I’m going to ask them if the franchisor does more than they promise in Item 11. And I’m going to ask them if they think Item 9 expects too much of franchisees.”

It’s a business transaction

“Great! Good questions. You’re right on track, Iz. This is a business transaction. The FDD isn’t intended to make you feel warm and fuzzy. It’s the cold facts from the franchisor’s point of view. It’s your job now to find out if their point of view satisfies your expectations and your idea of what owning and operating a franchise is all about. If it doesn’t make sense, you’re still in control. No one is going to force you to buy the franchise.”

“Thank you,” she said. “I’ll let you know what I discover.”

No doubt she will . . . and boisterously, too!

Read Previous Isabel Blogs

Is Franchising Indentured Servitude?

Figuring Out What You’ll Earn As A Franchisee Even When The Franchisor Doesn’t Tell You

Figuring Out What You’ll Earn As A Franchisee Even When The Franchisor Doesn’t Tell You — Part II

The Franchisor Spelled It All Out And Isabel Was Furious! She Screamed: “Do They Think Franchisees Are Robots?”

Why You Can’t Have It ‘Your Way’ When You Buy A Franchise. Get This: It’s Not A Democracy!

Join Me For A Coaching Session!

I do not sell franchises. I’ll coach you objectively and help you make a good decision prior to investing in a franchise. Learn from a guy who’s got 30+ years experience in franchising, as a franchisee, a franchisor, and a vendor. Click here and schedule your appointment today!

Photo image by: Robert Snache – Spirithands.net

New franchisees: Rob and Misti Reed

“What do you know about PuroClean?”

The question came from a concerned father who was looking out for his daughter and son-in-law.

First-time buyers

The young couple was planning to buy a franchise — and they had not owned one before. They had downloaded my report: 92+ Questions To Ask Before You Invest In A Franchise and had used it to build their own list of 92 questions! (Through the years, thousands of franchise prospects have obtained a copy of that report — always free! It’s still free to subscribers of this blog).

The young couple was now beginning the franchise discovery process and dad wanted to make sure they were getting good advice.

Tell them to do their homework!

I responded that I didn’t know the folks at PuroClean — I’ve not consulted with them or spoken at their franchise convention, for example (though I’d surely welcome the opportunity, especially now) — and I suggested that the young couple do their homework, compare PuroClean to other companies in the same industry, talk to franchisees (including former franchisees), dig into the financial opportunity, read and re-read the disclosure document, meet with responsible franchise advisors, attend Discovery Day, etc. — in other words, thoroughly research the opportunity before making a decision.

Several weeks went by and occasionally I’d get an update from dad, and then on July 20 I got word that the deal was done: Misti and Rob Reed had signed a franchise agreement with PuroClean.

Misti writing the check!

The thrill of a deal

For a blogger, it doesn’t get any better than knowing that someone visited your site, subscribed to your free blog, followed your suggestions, and found a deal they liked! I’m proud to have been a catalyst for this young couple, and I plan to follow their franchise journey, especially since I feel like I helped birth it.

Q&A: Misti Reed answers my questions

Rather than tell you the couple’s story in my words, I’ve decided to do a Q&A so that you can hear directly from Misti.

JPH: How did my blog help you? (May as well ask the selfish questions right away! And this may be a good place to remind my readers that I do not broker franchise deals; I do not sell franchises; I do not receive commissions or fees for selling franchises. My reward in this particular transaction is the opportunity to get this story and report it, boastfully!)

Misti: It was a great tool to reference during all phases of our research. This is our first time to purchase a business and it was helpful to be able to read the blog and review your webinars and articles. I look forward to the email updates and found the information was always easy to understand and very applicable to our needs.

JPH: After you downloaded my list of 92+ Questions, you then created your own list. How did that work?

Misti: Your list of questions was a perfect starting point to look through and decide which questions had already been covered and which I had forgotten. The (PuroClean) franchise representative was very impressed with how extensive our list was. Since this was our first time going through this process, it was comforting to know what was normal and acceptable to ask.

JPH: How did the franchisor respond when you presented 92 questions? It’s a lot of questions! I think some franchisors might get annoyed with the volume.

Misti: We did eventually get all 92 of our questions answered! Something I didn’t expect was that it was hard to cover a large amount of questions at once. We had weekly, one hour calls with our (franchise representative) and she had a set agenda for each week. She recognized that we would cover most of my questions throughout the process, therefore, rather than throw all of my questions at her at once, she asked that I revise my list each week after our call. . . . Some of the questions were covered very early in the process; a large number were covered when we received the disclosure document; and the remaining questions were covered during our validation calls and at Discovery Day.

JPH: How long did it take to do your homework and research the opportunity and then decide that you wanted to buy the franchise?

Misti: Our process took about six weeks. By the end of the first three to four weeks we had a very good grasp on the franchise opportunity and felt that most of our pressing questions had been answered. We started researching the franchise at the beginning of June, attended Meet The Team Day (Discovery Day) on July 20, and wrote the check that same day!

JPH: After looking at other franchises, why did you choose PuroClean?

Misti: Three reasons:

1. We wanted an industry that is as “recession proof” as possible.
2. PuroClean excels in its industry in the area of Customer Satisfaction, which was one of our “must haves.”
3. The margins! If properly run, this can be a very profitable industry.

They’re off to training

Misti and Rob will attend PuroClean’s 3-week basic training in August and then begin operating their business in Grayson County, Texas. Of course, along with their dad, I wish them all the best, and we’ll look forward to periodic updates.

Here’s what I appreciate most about the Reeds’ story: This is how it works! My job is to give you good information — information that you can trust and implement — and your job is to put it to work to your own advantage.

Congratulations to PuroClean’s new Texas franchisees!

Who is a customer?

Customers (or clients), by the way, are not just the people who buy your products and services. They also include your employees, and if you’re a franchisor, they include your franchisees.

Be careful of expert advice!

So I read a passage on a blog that provided “some helpful hints on how you can spot a great franchise marketing system” and the first hint was this:

Customers are brought in the doors. This is what every business boils down to in the end, whether or not the marketing system brings in the customers. After all, that is where you make your profits.

Taking the express train to bankruptcy

And I thought to myself: Or that is where you lose your profits, your money and ultimately your business!

It’s not enough to drive customers through the doors of a franchise, or any business. You’ve got to drive the “right” customers through the doors! Most businesses, and most marketing systems, do not fulfill that objective. And that’s one reason why businesses struggle and fail.

So don’t buy the franchise because “the marketing system” drives customers to the door!

Happy franchisees make the most money

To wit: Some years ago the new CEO of a major retail franchisor asked me to help his franchisees attract more customers and ultimately generate higher revenues so that (a) the franchisees would earn (and keep) more money, and (b) the franchisees would pay higher royalties. Since the beginning of franchising, franchisors have known that franchisees who make and keep the most money are the happiest franchisees!

So I spent several weeks working with a few franchisees to find out more about their customers. Here’s what we discovered (and I mean discovered — neither the franchisor nor the franchisees knew this information beforehand):

• It cost the “average” franchisee $100 to get a new customer to come through the door (that included marketing costs and the required fee for the franchise advertising fund).
• The “average” customer spent about $10.
• No one knew if the customer would return — ever.
• If the customer did return — no one could predict when or how often.
• The “average” franchisee did little to nothing to bring the customer back again repeatedly (and you may be surprised to find out why).

Busy, busy, busy going out of business!

So while it appeared “the marketing system” was doing its job, e.g. the franchisees were busy serving customers throughout the day, in reality “the marketing system” was slowly running the franchisees out of business (and perhaps into an early grave)!

That and the fact that the franchisees were so busy, busy, busy taking care of all the customers “the marketing system” provided that they had no time to do the things that would have insured getting the maximum benefit out of their customers, i.e. increasing sales, increasing frequency, building rapport with key customers, gathering referrals, etc.

Who caused that fire?

As one franchisee told me, “From the time I open the door in the morning until I close it at the end of a long day, I don’t have time to do anything but put out fires.”

Going through my mind: Does that sound like an ideal franchisee? How long is that franchisee going to last? How much validating will that franchisee do for the company?

Upon examination, most of the “fires” were caused by customers and employees. Occasionally, even though they didn’t know it, the franchisee caused some of the fires!

Blame it on the franchisor, of course

You can be sure the franchisor was being blamed for the majority of the challenges the franchisees faced. Frankly, I would take the side of the franchisees on that issue (though it does no good to blame anyone, but rather to accept responsibility). The franchisor could have done a better job sooner! In other words, the CEO that hired me had only recently arrived at the company. To his credit, he quickly assessed “the marketing system” and knew that it was broken. However, this company had been operating for many years prior to hiring this CEO. Where were the marketing folks all those years? Where was the company’s leadership?

Why doesn’t this system work?

So what was wrong with “the marketing system” at this client company?

Simply, it was producing the “wrong” customers for the franchisees!

Even among customers there are stars

Through our continued research we further discovered that not all customers were created equal! Some spent more money than others and never, ever complained or started a “fire”! Of course, those were “the right” customers.

Problem was, “the marketing system” — which attracted franchisees, along with the company’s brand name — produced too few “right” customers.

Revealing more about “right” customers

Without giving away too much information (and revealing the company), here’s more of what we discovered about the “right” retail customers for this franchise business. They:

• spent about twice as much as the average customer
• returned 3 to 4 times a week
• owned a business, which existed within 3.5 miles of the franchise location
• were males (64%) and females (36%)
• had partners in their business (46%); most often, a spouse
• were between the ages of 32 and 62

Remember garbage in, garbage out?

Wow! With just that information alone we could create a new marketing system that would target the “right” customers! All others were probably “wrong” for the business. The all-important “marketing system” was targeting “all others”!

Ultimately, with the help of the company’s advertising agency, we created a new marketing system that achieved the goals established by the CEO and supported by the Franchise Advisory Council.

Careful of the advice you get

So I shiver when I see “advice” that tells you to buy a franchise where there’s a “marketing system” that “brings in the customers.”

That’s good advice only if the customers are “right” customers. If they’re “wrong” customers, you can plan on owning and operating a business filled with headaches, challenges, issues, “fires” and, ultimately, not enough money for you or the franchisor.

And why would you want to do that when there are so many good “marketing systems” out there?

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• Do you know who your “right” customers are?
• Do you know how to find more of them?
• Do you keep them coming back for more once you capture them?

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