Investigating The Franchise 

You have the prospectus and you’ve gone through it carefully. You’re satisfied that you would be compatible with this company, and the franchise sounds like a new and exciting opportunity.  You have the start-up capital, the enthusiasm, and the skill set necessary to succeed, and the company’s dealings have been by-the-book and above board. 

Well, don’t sign anything just yet! Remember that earlier we discussed how the goal of the prospectus is to sell the franchise? That means you have to take a few steps of your own. Before you sign or pay anything, it’s your responsibility to learn a little more about this franchise. 

Investigating 101: From the Comfort of Your Own Home 

There’s no substitute for legwork, so you’ll have to hit the streets eventually. Before you do, however, sit down with that prospectus again and consider the following questions: 

·  Is the franchisor a member of the BFA? This is voluntary, and non-membership doesn’t make your franchisor a crook. Membership, on the other hand, indicates his or her commitment to acting in accordance with the European Code of Ethics. 

·  Is the franchisor experienced? If you’re inexperienced at franchising, you may want to think twice before working with an inexperienced franchisor.  

·  What is the franchise history like? If the company has other franchises, have a lot of them shut down recently? Is there any legal history of battles between the franchisor and franchisees? 

·  Do the figures seem realistic? Be honest: is this franchisor trying to snow you, or has he or she offered you a realistic, attainable estimate of your financial potential? 

These are the questions you should consider before you take another step. If, however, the answers are satisfactory, then it’s time to speak with other franchisees (assuming, of course, they’re available). Don’t feel awkward about this: it’s a standard practice. The franchisor probably assumes you’ll contact other franchisees, they are usually more than happy to give you an honest assessment of the franchise, and the entire thing is legal and above board. 

Speaking With Franchisees

Don’t assume that because a franchisee is a long-standing franchise owner, he or she is completely satisfied. Seek the franchisees out and ask them for a clear and honest opinion. Face-to-face is always best, but if you can’t manage that, the phone works just as well.

Be respectful when doing this: introduce yourself, explain your situation, and ask if there’s a convenient time you could speak to the franchisee. In some cases, they may be willing to speak to you immediately, but if you catch them at a busy time, respect that and set an appointment at a later date. 

Once you’re able to sit down with the franchisee, simply explain that you’re considering purchasing a franchise and ask for his or her general opinion. It’s always interesting to hear what people say right off the bat, but make sure you have a list of questions to follow up with. This is a handy collection: 

·  How long have you operated your franchise?

·  What was your total investment?

·  Were there any hidden or unexpected costs in the franchise purchase?

·  How many hours a week did you put in initially, and how many do you put in now?

·  How long did it take to break even and begin turning a profit?

·  Are you satisfied with the cost, quality, and delivery of the product?

·  Who is responsible for the marketing? If it’s the franchisor, are you happy with the level of marketing and advertisement provided?

·  Does the franchisor provide adequate support? Is the franchisor easily accessible if you have questions or problems?

·  What kind of initial training did the franchisor provide?

·  Does the franchisor fulfill their contractual obligations?

·  What is the best thing about your involvement in this franchise?

·  What is the most difficult thing about your involvement with this franchise?

·  What sort of skills, backgrounds, and abilities do you think are essential for a person investing in this business?

·  Would you recommend investing in this franchise?

You can always add your own questions to the list, and more will doubtless arise during the course of your conversation. However, you should always return to this list to make sure you get a clear, unbiased view of the franchise before you sink your lifelong savings into it. 

Speak to as many franchisees as you possibly can to give yourself the broadest possible outlook on the company. Once you’ve finished, sit down with the prospectus and your notes from the franchisee interviews. At this point, you should have a solid sense of the franchise. This is when things really get serious.