🍟 9/11/2023 – Top 10 Franchise Validation Questions

DEEP DIVE 

What to Ask Franchisees During Validation

When you’re in the sales process with a given franchise, at a certain point, they help you get in touch with current franchisees so you can hear directly from someone who has already “made the leap”, so to speak.

This is arguably the most important part of the process for anyone considering buying a franchise. Regardless of the brand, the top experts of any franchise are the franchisees. They’re the ones who have experienced the franchisors level of support. They’re the ones who invested their time and money to build a location. They’re the ones currently earning real money from the business!

If there’s only one thing you remember from today’s newsletter, let it be that. Compared to the franchisees, there is no better resource to learn about a franchise. Franchise brokers, sales people, and myself can’t hold a candle to franchisees of any given brand.

With that in mind, here are 10 great questions to ask a franchisee when you do get on a call with them!

  1. How does the franchisor help with site selection? 

This question only applies to brick & mortar franchises, but it’s critical to understand. I’ve heard tons of stories of franchises with dozens or hundreds of units sold, but they only get a couple open each year. If that’s happening, it’s not a great sign for the brands true growth potential. 

  1. How long did it take you to open your business after signing the franchise agreement?

Similar to the previous question, this is a good indicator of the brand’s support, as well as growth potential. More importantly, if you’re going to invest a ton of money into a franchise, you’d like it to get open ASAP so you can begin recouping that investment!

  1. What is your current revenue and when did you first open up?

Said differently, the goal here is to understand how quickly the franchise can ramp up. This can also be a wedge into a variety of operational topics, such as marketing, grand openings, customer statistics, etc.

  1. What level of turnover do you have at your locations – is retaining employees a challenge?

For a number of franchises, labor is the source of many headaches. Understanding what those challenges look like before you invest a ton of money into a franchise is something you’re going to want to know. 

  1. What are your profit margins?

Asking that question as directly as I stated it might not be the perfect approach, as sharing these details can be a sensitive topic depending on the franchisee. But this isn’t the time to beat around the bush, you’re considering making a very serious investment and life decision, so don’t be bashful.

You can absolutely preface the question with something like “as you know I’m looking at a rather large investment to potentially open a franchise, given that, I’m looking to understand if the profitability that’s in the FDD and has been discussed with the franchisor matches up with franchisees experiences

Regardless, it’s a missed opportunity if you don’t get granular insights into how much money they’re actually earning. 

  1. Is there anyone working for you (partner, kids, etc.) that isn’t on your payroll?

This is a question a first time buyer may never think to ask, but is something that isn’t completely uncommon.

It also directly relates to profitability, as sometimes na owner may have impressive numbers, when their family members are working in key positions and aren’t taking payroll, you have to factor that in unless you are able to do the same!

  1. How many hours a week do you work?

This is a question to get an understanding of the life you may be signing up for. Listen for more than just the number – whether it’s 40, 60 or 80+ hour weeks. Listen to their tonality and try to understand how they feel.

Are they stressed? Do they talk about owning the franchise as if it’s a job that is burning them out? Or do they seem fulfilled and energized?

  1. What is the biggest lesson learned since starting your business?

This could be a question that may get a generic response, but to me it’s worth asking as it only takes 1 nuanced in-depth response from a single franchisee to give you some insight that could make a big difference for you if you go on to sign a franchise agreement.

  1. What is 1 thing you wish you knew about starting this franchise before you joined?

This is a nicer way of asking, “do you have any regrets”. You want to understand if the franchisee has learned things that maybe she/he weren’t privy to in the sales process. You haven’t signed an agreement yet or invested any money, so now is the time to uncover any potential red flags!

  1. Are you happy you are a franchisee? 

Again, much like question 8, the tonality + authenticity of the answer here matters. At the end of the day, if no one is happy as a franchise owner, regardless of the other answers, do you really want to join that brand?


FRANCHISE HEADLINES

Zaxby’s Selects First-time Franchisees to Break into Phoenix Market

The Nelsons signed an agreement to open a half dozen Zaxby’s in the East Valley of Phoenix over the next five years. They’ve already pinpointed the sight of their first two locations in two of the city’s fastest-growing metropolitan communities. Right now, their first restaurant is scheduled to open in the fall of 2024 in Queen Creek, Arizona, with the second location to open in the spring of 2025 in Mesa, Arizona. The location of their next four locations have yet to be determined.

Toastique enters new markets across the country with franchising push

Washington, D.C.-based toast and juice concept Toastique is bringing its unique spin on the fast-casual health food trend to new locales with a rigorous franchising push. The company has opened five locations already in 2023 and has franchising agreements for 27 additional locations coming soon, including its first location in California, opening this fall in Newport Beach.

With 19 locations in its portfolio already, Toastique has stood out to franchisees looking to enter the highly competitive limited-service health food space by offering more than just smoothies and juices (though those are certainly on the menu as well).

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