5 Questions to Ask When Deciding to Become a Franchisee
Last week, we showed you questions for franchisors to ask when expanding their business. But what if you’re becoming a franchisee? The other side of the same venture has some similar and equally important questions to ask to avoid failure. Here are some questions you should be asking other franchisees in the same company to make sure you succeed in this business.
How did the unit opening go?
Ask the franchisees how their grand opening went. Find out if it not only went well, but stayed busy after that or if sales quickly dropped off. Also, make sure that the franchisor will offer their support during your opening. This could include corporate personnel, advertising and marketing, promotions, and funding. A grand opening is important, and if the franchisor will not support you, you may want to think seriously about joining their branding.
Franchisors may offer great opening presentations and close support for the first week or two. But after that, will you get the support you need? Ask existing franchisees whether your franchisor will disappear once you’re on your feet.
Find out how disagreements with policies and procedures go over in this business. Will you have a mediator? Will they value innovation, or demand their way or the highway? If you’ll be mistreated or steamrolled during conflict, this brand may not be a good fit.
If you did it all over again, would you buy this franchise?
This important question can tell you a lot about the ups and downs of running a franchise in this brand. It’s vital to ask average franchisees as well as the successful and financially independent. Their answer will show if this business helps owners succeed financially, or if it’s more of a daily grind with little to show for it.
What do franchisees think of the franchisor?
You can either ask this question directly of the franchisee, if you suspect you’ll get an honest answer. If not, you can take to the internet. Franchise sites like Blue Mau Mau and Unhappy Franchisee can reveal shady dealings within the company or negative reviews from franchisees themselves.
What is the turnover and failure rate?
Pay close attention to your Franchise Disclosure Document (FDD). If there is a high turnover rate, that could mean trouble. One red flag is if the owner has to buy up franchises to keep them running. Another is a high percentage of closures.
If you see these, don’t rely on the franchisor’s assurance that mass failures are the fault of lazy franchisees. Get in contact with previous franchise owners and find out why their unit closed. You may find that they had little or no support from the franchisor, or that it was simply a bad location.
Bonus: What is the business really like?
The best way to find out the daily workings of this brand is to job-shadow the franchisee before purchasing a unit. This helps show you what will be expected of you once you take on the franchise. Very rarely will you be able to let it run on autopilot. You’ll need to know whether you’re on your feet all day in a management position, and whether you’ll be okay with that for the long-term before you buy.
Speaking to current franchisees can be an important asset for you before purchasing a franchise. This way, you’ll be able to get your finger on the pulse of a franchise. There’s no better way to know if a brand will lead you to financial independence.