Taking Advantage of the Support from Other Franchisees
One of the biggest perks to buying a franchise is the support system that’s available. Besides the franchisor, the training and the marketing support, buying into a franchise system also means that you get to watch and learn from other franchisees that have successfully launched and built their businesses. Before you sign on the dotted line, talking to the existing franchise owners in a system will give you a good idea of what it’s like to be in the trenches every day.
Each franchise system is required to share contact information for former and current franchisees in Item 20 of their Franchise Disclosure Document (FDD). You’ll want to talk to a handful of different owners, both former and existing. Also, try to talk with owners who are located near you or in similar vicinity, because while a concept may work well in one area, it may not work well in your area.
The next step is to be proactive and arrange to talk with as many franchisees as you can. They’ll all have something different to share. Even the former franchisees will be important to talk to. While some of them may be upset because they’ve lost money or otherwise, don’t let their negativity towards the concept make you think it’s a poorly run operation. When it comes down to it, only 5 percent of franchise businesses fail, according to the U.S. Department of Consumer Affairs, compared to the 30 percent of independent, non-franchise companies that fail, according to the Small Business Administration. Franchises fail for many reasons, but most commonly because the concept itself is not strong enough, the location is bad, there’s heavy competition in the area and/or the franchise owner has unrealistic expectations. These are all points to consider before taking the plunge.
Once you’ve made appointments to talk with these franchise owners, prepare a list of questions you’d like to ask. This will help to keep the conversation on track and get you the answers you’re looking for. You’ll want to ask them such questions as: How satisfied are they with their franchisor? Are they happy with their decision? How long did it take to turn a profit? Is the franchisor responsive to questions and concerns? What’s your day-to-day like? Were there any unexpected hidden costs? Did the franchisor provide sufficient training to get them up and running? Did they run into any problems?
After you’ve done your due diligence and met with franchisees, you should have a pretty good idea about how the franchise business runs and whether or not it will be a fit for your budget, lifestyle and career goals. Another great option to help you identify the right franchise concept is to work with a franchise consultant, like those at MatchPoint. Not only will they take the time to get to know you as a person and understand what you’re looking for, but they’ll do a lot of the hard work for you in determining a business that will give you the greatest chances of success. For more information or to speak with a consultant, click here.
