How to get the truth from other franchisees before you buy a franchise

By Sarah Stowe | 29 Oct 2015 View comments

Every franchise buyer needs to research the business opportunity and that includes speaking to existing franchisees. Here are 10 tips for wading through the facts and finding the truth before you buy a franchise.

According to Andrew, a conversation was his dream killer. He had been investigating a food franchise for months and on a family holiday he popped in to the local outlet. He introduced himself to John the franchisee; John willingly sat down for a chat.

John was well spoken and articulate. He shared his latest P&L and was forthcoming in his results and experiences. After about half an hour John lowered his voice, leaned into Andrew and said ‘that’s what the franchisor wants me to tell you, but you seem like a really nice bloke. I’ll tell you the truth’.

The horror story that followed made Andrew’s toes curl! He left the meeting with John shaken, disillusioned and resolved to drop his dream of owning a franchise immediately. Andrew was shocked at how his due diligence process had not uncovered kind of information John had shared with him.

Jenny was the recruiter for the franchisor and had been working with Andrew right through his due diligence process. Jenny followed Andrew up after his holiday.

Andrew told Jenny about his conversation with John. Andrew said he would be withdrawing his application and was horrified by what the franchisor had done.

Luckily, Jenny was a cool cat. She listened intently to Andrew and without betraying any confidence was able to share relevant facts about John’s situation.

There are always three truths, yours, mine and what actually happened.

The truth can be a slippery little sucker. It’s open to interpretation, gets distorted by emotion and everyone has their own version of it.

Andrew caught John’s emotions and stopped seeing the facts.

So where is the truth?

Ask franchisees about their business

When looking at a new business we all know its best to make a decision based on accurate, good quality information and facts.

One of the best sources of information is existing franchisees. They can tell you the intimate details of what it means to own a franchise, what they are making, the hours they are working, what’s lived up to their expectations and their disappointments, the things they wished they had of known before signing on the dotted line. That information is GOLD!

The ideal is to get as many facts as possible. Maybe in some instances they can back up what they are saying and will share P&L’s, supplier invoices, cash flow, detailed sales figures and rosters. More likely they won’t. That info is the heart beat of their business, so hand it over to a stranger is difficult.

Most often the kinds of conversations you have will be peppered with the emotions surrounding their personal experiences.

How then do you cut through the perceptions, biases, opinions, interpretations and get to the facts.  

10 ways to find out the truth from a franchisee

  1. Check yourself first. What biases are you bringing into a conversation? Do you really really want this, and it won’t matter what truths are put in front of you, you will spin it to a positive?  Or the flip, you go into the conversation just looking for the negative? Maintain a neutral stance in the conversation. Keep your mind open.
  2. Be clear on what you want to get out of the conversation. I just want to have a chat is good on a Saturday afternoon at the pub – not for finding out information you will base a life changing decision on! Respect their time and make the most of this opportunity. Prepare a list of questions.
  3. Set up the conversation with a tone that encourages them to be forthcoming. Be open and frank. I’m hoping this conversation will give me some facts I can use to make an informed decision. I understand some of the information I ask about is sensitive and I want to reassure you I will respect the confidentiality of anything you tell me.
  4. Ask them if they mind if you take notes. Tell them to let you know if there is anything they don’t want recorded.
  5. Deception [or a dodging of the truth] is usually driven by fear.  Franchisees are more likely to be candid if you can alleviate their fears. They may be concerned about what you will do with the information for example. You can reassure them any information they share will be kept confidential, or share some sensitive information with them first to build trust.   
  6. Build rapport before you hit them with the big questions. Share relevant parts of your journey; ask them about their family, their hobbies, and what they did before becoming a franchisee. Warm up the conversation and establish trust and respect.
  7. Ask good questions. Start with general open, ‘getting to know you’ questions and then make your questions specific. Good openers are what do you like /dislike most about being a franchisee, has it lived up to your expectations. More specific questions are how often do you have contact with the support office?, What do you spend each quarter on marketing or What does your Field Support person do each visit?.
  8. Ask for evidence – all they can say is no. ‘Can I see your sales reports’, ‘Can you talk me through the P&L pro forma the franchisor uses’, ‘Do you have an example of the benchmarking you use’.
  9. Be suspicious of anything that sounds like opinion. Ask them for clarity. How do you know that? What facts do you base that on?  Is that a rumor or has it been confirmed? Keep your tone light and conversational, you don’t want them to feel like they are being interrogated.
  10. Watch their body language. Avoiding eye contact, putting their hands in front of their mouths, turning away from you, are all signs they may not be telling you the truth.  

What ever comes of these conversations, do what Andrew did and take your findings back to the franchisor. Find out their side.

Andrew ended up speaking to eight more franchisees. He talked to landlord, suppliers, other business owners… his due diligence was impressive. Armed with facts he made the decision to go ahead with the franchise.

He told me his ‘dream killing’ conversation with John was a blessing in disguise. It set off an emotional rollercoaster [that cast a shadow on his holiday!], but it also made him take a big step back and look at everything critically.

It brought all his thinking back to the facts, and he felt extremely confident in his decision by the end of his process.

Andrew’s learning was that franchisees told him their truth.

Your due diligence mission is to wade through the many versions of truth you will uncover. Back everything you can up with facts and make an informed decision.