Tough Lesson For A Franchisee

Published on October 17, 2016

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Recently, an individual reached out to me after purchasing a fairly well-known franchise.  For illustration purposes, I will refer to the individual as “Sally.”  Sally had purchased a franchise 85 days prior to contacting me.

And she had one question:  “How do I get out?”

“How do you get out, I responded, but you just got in.”

“Yes, she said, but I made a terrible mistake.”

Through a series of questions and answers, I soon learned that Sally did a fair amount of checking before she bought the franchise.  She researched the franchise.  Had a good understanding of the business model.  Had the right experience necessary to become a good franchise operator. Afterall, Sally is an accountant and knows numbers.  She also has had years of experience with a corporation.  Both very good experiences to have before transitioning to a franchise owner.

But as I pressed deeper, I soon realized that Sally made one very big mistake:  she did not speak to enough current or former franchisee owners within that particular system. 

This was the $40,000+ lesson.  Gone.  Not to be retrieved (I was able to get some back, but most of it….gone).

Don’t make this mistake.  Learn from Sally and understand once and for all:

There are no shortcuts to finding the right franchise. 

You must be dogged when you search.  You must turn over every stone.  Question everything you don’t understand.  Speak to others who are currently part of the franchise system you are interested in, and former owners as well.  You must ask them the tough questions, and push for truthful and complete answers.

Below are 12 questions that at a bare minimum you should ask franchisees BEFORE you buy:

  1. Why did you select this franchise over others?
  2. What is your background?
  3. Does the franchisor provide quality training and support as promised?
  4. How many hours a week do you work?
  5. Are you profitable? If so, how long did it take for you to become profitable?
  6. How much of a capital reserve did you start with?
  7. What unforeseen problems have you encountered?
  8. Has the franchisor been responsive to your concerns and receptive to your suggestions on how to better the brand?
  9. If you had the opportunity to do it all over again, would you buy this franchise?
  10. What do you spend most of your day doing?
  11. What are your average month over month sales?
  12. What are your average month over month expenses and overhead?

The answers to the above questions should provide you with a good amount of information.  This is a good beginning.  But also be thinking of follow up questions that you can ask. If a question pops in your head while speaking to other franchisees, ask it.  The worst that can happen is that they don’t answer.

I am so adamant about doing all of this because it breaks my heart to hear from  people who regret the franchise they bought.

Be the exception, and do your due diligence.  This won’t guarantee success, but it will help your chances.

Buying a franchise is mostly like buying any other business, and you should approach it as such.  One of the big differences though is that with a franchise you are signing an Agreement that will lock you in for  5, 10, 15 & possibly even 20 years.  The average franchise agreement is 10 years.

There is not one main thing that you need to do to make a smart franchise purchase.  There are many.  But shortcutting the process is a big gamble.

When I asked Sally why she didn’t speak to current and prior franchisees before she signed the Franchise Agreement, she said that she reached out via email to a couple of franchisees but did not get an immediate response.  So instead she relied on what the franchisor told her about the system.   When she finally spoke to the franchisees she had previously reached out to, she had already signed the Franchise Agreement.  It was then she learned of some big problems with the franchise system.  Sorry. Too late.

Don’t be too late.  Learn from Sally’s story and do the work.

And don’t rush.  Any worthwhile franchise system will welcome your questions, your due diligence and the time you take to make the purchase. If they don’t, move on to another system.


Written by Team
Tough lesson for a franchisee 10 17 2016

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