During the Discovery process of buying a franchise, and typically after you have received the Franchise Disclosure Document (FDD), you will be given the chance to talk with current and even past franchisees.
This is a golden opportunity and one that you should take seriously. When you receive the FDD, you will have all of the information that you need in order to do that.
Typically, the franchisor may give you some names based on certain criteria that you have given them. For instance, you want to talk with people who have been franchisees for under 2 years, over 5 years and in a similar sized market. You may ask to talk with people who have a similar background to you. In any event, you should talk with at least 6-8 people before you make a decision.
Before You Start Franchise Validation Calls
Know that this call is two ways. The franchisee will probably report back to HQ what they think about you. They may give an opinion about your personality, drive or background based on the questions you ask, and the way you listen.
Prepare For Validation Calls
Prepare for your call. The franchisees are probably busy and may get a number of these calls. Have the questions that you want to ask ready and don’t waste a lot of time telling them how great you are. I’ve spent time on a call like this listening to people crow about themselves and honestly it is boring. And that is not the kind of validation you are looking for! Also prepare your opening statement. This is not a time to fumble around. (see below).
Reach Out and Set An Appointment
Call or email to set an appointment, quickly introduce yourself (Hi this is Joe, Sam from Franchise HQ suggested I call you as part of my validation process–can we set a time to talk for 15 minutes when it is convenient for you?) This sounds like a simple step but I have had people say “Hi this is Fred and I spoke to corporate so I bet you can guess what I want to talk about” No Fred I can’t. Or maybe I could, but I don’t have time.
The Franchise Validation Call
When you are on the call, again introduce yourself then say something like ” I’m hoping to get some insight into your thoughts as a franchisee. If it’s ok, I’ll tell you a little about me so that may help you tailor your answers, then I have a couple of questions.”
Then BRIEFLY tell your story including WHY you want to do this business (or any other)–(ex.: I’ve been in IT for 25 years, now I have 45 direct reports, I’m gone Monday to Friday and I want a better quality of life. I’m a good manager, but I’ve never done sales before so that is a big question mark for me. I’m also looking at X Business (if that is the case))
Then segue in with something like, “I was hoping you might tell me what you were doing before you got into this business and how you decided to buy into this system”
This question eases in. Don’t start with “How much money can I make?” or worse, “How much do you make?” You will get to that by the questions you ask. Besdies, money, while important, is not the only thing you want to know about this business.
Questions You May Want To Ask
- What are the things you like about this business? Dislike?
- What is a typical day like for you? How do you spend your time?
- What do you know now that you did not learn in the Discovery Process?
- How long did it take you to be able to pay yourself from the business?
- How much did you budget for your first year, and how much did you wind up spending? What accounted for any variation?
- I’m trying to put together a proforma, I’m using x as a gross profit margin, is that about right? And I’m looking at Y as a net margin. Is that realistic?
- What was the toughest part of building the business?
- How supportive is headquarters? How was/is training?
- How challenging is it to hire good staff?
- Given what you know now, would you do it again, or recommend to a friend or family?
Assessing The Calls
Keep track of the answers and look for patterns. Patterns of multiple people saying the same thing is often a good gauge of the reality.
Keep in mind that some people may not want to admit that they are struggling. Others may inflate how well they are doing. But most will be fairly honest about questions like the last one. This is why you want to talk to more than 3 or 4 people. And you won’t ask ALL the questions to everyone. prioritize your questions in case you only get to 4 or 5.
My personal belief is that most people will not pull you onto a sinking ship. If things are bad, they will tell you. But one person complaining does not mean the system doesn’t work, it could be the person not following the system or not being willing to do the work. And only one successful person does not indicate a successful system.
One note, if you ask people how much they pay themselves, you may be in for a shock. Many business owners pay themselves a small salary and take the rest in shareholder disbursements, so again, asking people how much they make may put them off and not even get you the full answer. On the other hand if you focus on the percentages for profit margins or amount spent on marketing or staff, you may get answers that will better help you build a good plan.
Finally, listen to the people. Are they excited about the business, looking to the future, talking about growth? Or are they tired and overwhelmed.
The End
Thank the person and get off the phone. Don’t try to tell them how smart you are, how you found something better, a story about your brother in law etc. You are GATHERING information and that should be your focus.
Thank You
Send a quick thank you note, with your full name. Sometimes when you call and quickly say your name people don’t get your full name and want that so they can report back to HQ or just know which Joe they spoke with.
If you want help going through the franchise selection process, feel free to reach out. Buying a franchise is an important decision and one where a trusted advisor can help. You can reach me at mkennedy@yourfranchisepro.com or schedule a call.