Franchising & You

by Simon Lord

last updated 27/03/2020


50 questions to ask franchisees

by Simon Lord

last updated 27/03/2020


Want to know what a franchise is really like? Ask the people who are already there

One of the best sources of information about any opportunity you may be considering is the existing franchisees in the same system. After all, they have already made that choice and are living the life. By talking to them either in person or on the phone, you can learn what that life is really like. You will get a realistic assessment of the return that can reasonably be expected on your investment; the hours of work you will need to put in; the amount of service and advice provided by the franchisor; the general atmosphere and image of the franchise; and the everyday experiences of a franchisee. Here are some tips to help you get the best out of your researches. 

- Choose which franchisees you interview. You want to talk to a mix of established people who understand how the franchise works and its potential, as well as more recent franchisees who have been through the latest training. You especially want to talk to franchisees in locations or territories similar to the one you are considering.

- Don’t just accept a list of ‘approved’ franchisees from the franchisor – they are hardly going to point you in the direction of people who have had bad experiences. Get a full list of franchisees from the franchisor and choose from that. It’s fair to tell the franchisor who you want to talk to, as they may need to let your chosen franchisees know in advance that you will be calling and that you are a genuine prospective colleague, not a competitor fishing for information.

- If possible, talk to at least four or five franchisees. They will all have different experiences and the more people you talk to, the more realistic and balanced an impression you will get. There’s always a risk of catching someone on an exceptionally good or bad day so you need to be able to put that feedback into perspective.

- Interview people face-to-face or over the phone, rather than via email. People will be much more brief and more guarded when giving written responses and you won’t be able to listen to their tone or ask follow-up questions. Also, people can be reluctant to put something in writing if they think there is a chance of it getting back to the franchisor –­ even accidentally.

- Do prepare for interviews – whether in person or over the phone – in advance. Keep them as brief as possible. If you’re serious, franchisees will usually be happy to answer questions but remember, it’s not their job to tell you about the franchise. They have their own business to run so talking to you is taking them away from that. Be appreciative. 

To help you prepare, here are some questions you might like to think about. Don’t ask every franchisee every question – pick the areas that are of most concern to you and focus on those.

How does it suit?

The first thing you want to know is what sort of person you are talking to and how they run the business. Ask:

- What was your previous experience before buying this franchise? What did you know about the industry? What skills do you consider essential for success?

- What do you enjoy about the business? What do you dislike?

- What hours are you open? How much time do you spend doing preparation, organisation or paperwork after hours? How much of this do you do at work and how much at home?

- What was the impact of running the business upon your family and social life when you first started? What is it now? 

- How has your experience matched up to what the franchisor told you?

Preparation

An established franchisee should be able to evaluate the training they received. Of course, no training can prepare you for everything, so you need to be certain that on-site and ongoing support will be available to help you fill in the gaps when you first start.

- How good was the training? How far did it prepare you for running your own business? How well did it cover day-to-day operations? How well did it cover business development, sales and other subjects? Has the training programme changed since you went through it? Do you think it has improved?

- What sort of support did you receive when you first opened? How helpful was it? Did you receive enough support?

- What sort of marketing support did you receive? Was it effective? How did you make the best use of the opportunities it created?

Ongoing

Once you are up and running, you’ll need a different type of support. You’ll be paying for it, usually through a flat fee, royalty or product mark-up of some kind, so you want to be certain you’ll get value for money.

- How good is the support you receive from the franchisor? What form does it take? How often does someone visit your business? How responsive is the franchisor to requests? (see page 68)

- What marketing and promotional campaigns are provided? On the whole, are they effective? What additional activities do you have to carry out yourself?

- Are supplier relationships good? Are there restrictions on what suppliers you can use? Do the preferred suppliers generally provide good value for money?

- Have you had to have a re-fit within the term of your franchise agreement? How much consultation was there? Did it increase sales?

- If there is any specialist software provided, how good is it? Is it easy-to-use? Is it reliable? Do all franchisees use the same system?

- Does the franchisor carry out benchmarking across the franchise network? Is this helpful? How do they follow up? 

- If there is an exclusive territory, is it of a size to allow you a reasonable return? Have there been any disputes over territories with the franchisor or other franchisees?

- What level of competition have you experienced? Does the franchise offer real competitive advantages? What are they?

- Has the franchisor met its obligations under the franchise agreement? Have there been any areas of dispute? How were these resolved?

Financial

It might seem rude to ask strangers about what they earn, but if you want to choose a business that suits your needs then you need to know if it can meet your expectations. Here are some questions that shouldn’t seem too intrusive.

- Were the franchisor’s projections correct about the amount of capital and/or borrowing you would initially require? Did they include working capital? Have you had to increase your investment since?

- Were there any hidden fees or unexpected costs? If so, what were they?

- How long were you trading before you achieved break-even? How long before you started generating income from the business?

- Has the return been in line with your expectations?

- What has the single greatest effect upon your annual net profit?

Technology

Technology is increasingly affecting all kinds of businesses. Is your intended franchise switched on to the opportunities and threats it offers?

- Is the point of sale or invoicing system easy to use? Does it provide you with information that is of help in managing your business? Does it allow easy benchmarking against other franchisees?

- What information about your business does the franchisor have access to? Does it enable them to assist you better?

- Does the franchise have a good website, and how does it affect franchisees? Does it offer products direct to customers? Do you feel you are in competition with the website or is it a good source of leads or business for you?

- Does the franchise have a co-ordinated social media strategy or do franchisees do their own thing? Are there guidelines in place?

- What was the last piece of technology introduced by the franchisor? How easily were you able to incorporate it into your business? How helpful was it? Was it worth the cost to you?

Relationship

One of the most important aspects of meeting a number of franchisees is that it will give you a feel for the type of people who are attracted to – and who succeed in – the franchise. If you buy into the franchise, these are the people who will be your colleagues and your mentors. How comfortable will you feel with them, as well as with the franchise itself?

- How would you describe your relationship with the franchisor and other franchisees?

- Have there been problems between franchisees – eg, competing for customers? How did the franchisor manage the situation?

- Have there been significant disputes between a franchisee and the franchisor? How were they handled? Did you feel the franchisor acted in the best interests of the franchise as a whole?

- Is there good two-way communication with the franchisor? How does this happen? How often?

- How often do you meet or chat to other franchisees? In person? Over the phone? On-line?

- If you were starting again (without the operational knowledge you have now) would you buy the same franchise again?

Finally

Remember, although you want to find a business that will be a good financial proposition, you also want to find one where you will be happy. After all, a franchise is made up of more than a brand and a set of operating instructions – it’s made up of people. 

By talking to other franchisees, you’ll gain an insight into the culture of the business, the type of people it attracts and how you might fit in. Talking to a variety of different franchisees should not only give you that knowledge; it should also give you a better understanding of what you need to do to be successful.

Do it right and it could be others coming to ask you questions in a few years’ time.

 

This article was last published in Franchise New Zealand magazine Year 29 Issue 1

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