One of the most important steps in the due diligence process of buying a franchise is to interview existing franchisees. I recommend that you interview as many as possible and that you visit at least one and spend at least part of a day exploring the franchise opportunity. After working in a franchise for a day, or a weekend, you might decide it’s not really for you!
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.Tags: interview existing franchisees
This post was written by Dr. John Hayes