What franchise buyers want

By James Young | 23 Sep 2019 View comments

What are franchise buyers looking for in a franchise purchase today?

Franchise buyers have never been more educated and cautious in the franchise buying process and this is the best thing to happen to the franchise industry.

The media has become an urban dictionary for anyone wanting to make business decisions. From franchise-related articles and podcasts, to magazines and online blogs – the media provides a world of information and knowledge on leading topics like ‘buying a franchise’. On the other hand, the noise has also opened the door to new questions being asked by potential franchisees and an extra layer of uncertainty being executed during the franchise sales process.

What franchise buyers want and expect

Franchise buyers expect more from franchisors in all aspects of the partnership and now demand insight, validation and proof of the franchisor’s ability to meet their business expectations.

This includes clear financial data that shows proof of previous performance and a valid explanation of what to expect in the future.

It’s always important to remember that although a franchisee financial model won’t be able to accurately predict a franchisee’s income, it should however, act as a guide for the franchisee. This means disclosing accurate and current P&L figures and showing how the business will operate. Include business expenses such as the cost to operate on a monthly basis, wages for staff, cost of suppliers, technology systems and accounting software and  their potential earnings.

Franchise buyers also expect validation of decision making, including site selection, marketing campaigns, brand strategy and complete transparency throughout the franchisee-onboarding process.

Most franchisees will also expect professional data and research based on the location of the franchise business. Examples of this can be obtained through geographical data outsourced to experts that specialise in this field – often referred to as ‘geo mapping’. Other ways to ‘test’ a location or specific site could be done through a survey conducted on the market or customers feedback, research on the foot traffic or reach that the business will be able to attract or even a pop-up venture to evaluate the initial response and success. These efforts will help your mission to prove to a franchisee as to why a specific site has been chosen.

But that’s not all. They want to know exactly what they’re getting themselves into – which is understandable when you think of the statistics related to joining a franchise system. Most franchisees operate and own a franchise business for around seven years. It’s common for new franchisees to put most of their life savings into the business, especially when capital is required upfront. With this in mind, when purchasers are buying a franchise, they want the facts that accompany it and want to be part of your success.

Demands in the franchise agreement

They want to look under the hood and get a great insight into what life as a franchisee will look like. This includes being given access to existing and past franchisees contact details during the due-diligence phase of their buying decision. They want to gain some wins in the negotiation and end up with an agreement that benefits them and is tailored to what they need.

Lawyers representing franchisees during a franchise purchase are being more cautious, often demanding over and above what’s offered in the franchise agreement. They are also pushing key clauses to protect their client. Franchisees want to know the partnership is not one-sided and that the franchisor has their best interest as a priority.

You should be encouraging franchisees to do this in-depth level of research and pushing them to conduct important decision-making activities. The more they research the brand and get to know your business model, the closer their expectations will be to the actual reality.

They will also be more likely to advocate for you and the business when the next franchisee knocks on the door. You want your franchisees to be happy in the business as their success directly impacts your business and future growth.