Most franchise investigation processes have 3 phases – foundational calls, validation and discovery day. Each of these phases has a role in shaping your understanding of the business and in helping you determine if that franchise is a good investment based on your individual situation, skills and goals.
The middle of the investigation process is focused on franchisee validation. This is your opportunity to speak with current owners of the franchise system that you are investigating to uncover their experiences in the brand. Some of these conversations will be in small groups, others will be one on one. In some instances, you may have the opportunity to listen to a few recorded prior conversations before you start live discussions.
There are always scores of questions swirling in your head that you may want to ask. I want to help you cut to the chase and dig into the most valuable topics quickly in order to maximize the value of your time with that franchise owner.
Here are my suggestions of 10 questions that will produce maximum value during your conversations.
1. How does the franchisor assist with site selection?
One of the most critical issue for a franchise, particularly a retail, facility-based brand, is the selection of a great location. Ask questions to understand what types of support the franchisor offers on this issue.
2. How long did it take you from signing your franchise agreement until you opened the doors?
This process has many steps and takes longer than you think. Ask follow up questions to understand what actions you could take to shrink this time and get into business faster.
3. What support does the franchisor offer regarding marketing and customer acquisition?
Everyone gets into business to make a profit. The starting point in the profit equation is finding customers who want to purchase your product or service. You want to uncover what support the franchisor offers in marketing to find potential customers.
4. Tell me about the ramp up of your revenue.
With this one question, you will have the opportunity to dig into a variety of topics including marketing, pricing, customer retention, membership statistics and others. Use this as a broad starting point to nail down some financial statistics.
5. How difficult has staffing been in your business?
Most business owners will tell you that the most challenging part of ownership is finding, retaining and managing great people. You want to ask questions to understand specific challenges related to talent management in this business.
6. Were the financial assumptions that you build into your pro forma accurate?
You want to know answers about profitability and time to break even. However, this is a sensitive subject for many owners who do not feel comfortable discussing income and profitability directly. Use this question to beat around the bush and start a conversation about profit.
7. What has been better than expected with your business?
There will be some issues that may have worried the owner that did not prove to be a problem. This may help to alleviate some of your concerns.
8. What is biggest challenge you faced in your first year in business?
This may be an issue that you did not foresee. It will also be different for different owners. So, it is important to ask this question to everyone to solicit different opinions.
9. What skills are most important for a successful owner to use in this business?
You come to this juncture with a skill set that is stronger in some ways than others. You want to evaluate if your skill set – team building, marketing, sales, financial management, customer service – is a good match for this business.
10. Are you looking to expand to additional locations?
This is the money question. If the owner is looking to expand, that is a big positive. If they are NOT looking to expand, there are a variety of reasons why that is the case. Ask follow-up questions to understand the whole story and the evaluate the situation.
Are you in the middle of a franchise investigation and seeking some guidance? Do you need help with validation work? Chris is here to help you! You can contact Chris Cynkar by telephone at 412-877-2000, by email at ccynkar@franchoice.com or visit www.chriscynkar.com.