Check Before Cheque - Talk to Existing Franchisees
Researching a potential franchise is essential before you invest your money, and talking to existing franchisees is a vital step in your research. Stuart Anderson explains why.
Armed with a shortlist of franchise opportunities, it's time to get stuck into the serious research. You'll need to plough through paperwork and records covering company accounts, business referees, customers, trade association assessments and franchise performance forecasts, and ask the franchisor a whole list of searching questions.
Ask any franchise advisor and they'll insist that current franchisees are the most valuable resource in judging the viability of a franchise opportunity. After all, they're the people at the sharp end of the business, actually experiencing the pressures, pitfalls, pleasures and profitability of the franchise concept. They'll be able to provide real stories and real figures, rather than talking in abstract forecasts and expectations.
Want to know how long you're going to have to operate without a living income while the business finds its feet? How many hours are you going to have to put in to build a customer base? How accurate have the franchisor's profit & loss forecasts proven? How useful is the training? What is the franchisor like to deal with? A current franchisee will have opinions on all these queries, and by speaking to four, five or even more you will be able to get a range sufficient to allow you to make a reasonable judgement.
Difficulties in obtaining the list
Of course there are franchisors that will not turn over a list of franchisees. Some argue that they need to protect their concepts and networks against business espionage or poaching, or that their franchisees are too busy to spend time responding to every query they receive from potential franchisees.
Alternatively, the franchisor may provide a limited list of franchisees to contact, when what you really want is a full list of every franchisee in operation. It's not that you're going to call every name on the list - your phone bill could end up outsizing the franchise investment - but that to gain a true impression of the performance and satisfaction of the franchisees you will need to phone a random sample. In any pre-selected list there will inevitably be a bias in the selection, and the franchisees the franchisor doesn't want you to call are exactly the ones you want to speak to the most.
In some cases the bias is not to focus away from underperforming or difficult franchisees, but to guide you to speaking to less independent franchisees, or 'pet' franchisees. Some franchisors groom these pets to act as standard referees, and may even pay commissions on successful recruitments. Alternatively, the franchisee may be a friend, relative or partner of the franchisor, or even a board member - not necessarily put there to deceive you but certainly not a source of unbiased opinion on the franchisor.
Whatever the potential validity of an individual franchisor's reasoning behind why you can't contact some or all of the franchisees, the bottom line is that any obstruction to you obtaining a contact list for the entire franchisee network represents a serious blow to the credibility of your research into the viability of the franchise opportunity. The indication is that the franchisor lacks confidence in his own system and how he is perceived by franchisees.
Of course if the franchisor refuses to provide you with a list, or only a limited one, there's nothing to stop you contacting other franchisees off your own back. Some simple detective work through internet searches, Yellow Pages and 118 directory enquiries should produce some contact numbers. Approaching a franchisee unannounced in this manner may cause suspicion and reluctance to share their opinions - after all you could be the competition checking them out or the franchisor checking up on them - but handled diplomatically you may still be able to glean the information you need.
Handling The Call
Equipped with a list of all the franchisees in the network, it is now time to speak to as many as you can to put together a complete set of opinions on the franchise. Ideally you want to speak to an eclectic mix of franchisees - new franchisees who can give you up-to-date opinions on the training programme and launch assistance, and longer serving franchisees that can give you an impression of the financial growth potential of the franchise and the market conditions affecting it.
The more franchisees you speak to, the more you will be able to eliminate bias in your judgement, and minimise the affect of a particularly optimistic or pessimistic response in your mental survey. Vary your tactics - pretend to be a customer to see how professionally the phone is answered. If you get the chance, visit some franchisees on-premises to gain a visual impression of the business and even perform a 'mystery shopper' test to gauge the level of customer service.
One thing to remember: the franchisee is not the franchisor, and does not gain financially from your franchise investment fee. He or she is spending the time to talk to you out of professional courtesy, and if the encounter is approached in the spirit of a friendly chat rather than a grilling, the franchisee is far more likely to respond to your questioning and provide a real insight into the running of the business