Franchisers can dazzle prospects with shiny brochures & slick presentations, but you'll need to get beyond those to the hard facts about their offer. To help, they assembled a panel of specialists & asked them to identify the key questions you ought to ask & the best ways to get franchisers & franchisees to tell you what you need to know.
Sell skin-care products or own a hotel. Groom canines, help people lose weight or do their taxes. These are a number of the opportunities in today's franchise world, which includes a boggling variety of ideas selling every imaginable product & service. How do you know which you'd truly enjoy? How do you know which represents the best business opportunity?
Five times you identify a brand you are curious about, start by requesting & thoroughly reading the Franchise Disclosure Document, or FDD, that each franchisor is legally necessary to provide to prospects. In case you don't understand everything in it, have a franchise attorney or consultant report the terms.
Then you are prepared to start speaking to franchisors. If they could only ask a franchisor questions, Jeff Elgin, CEO of franchise consulting firm FranChoice, says they would be:
* What is your number-one focus? The answer you need is 'the success of our franchisees,says Elgin.But I have gotten: Our number-one focus is our own bottom line.' That would concern me.
* Why do franchisees get in trouble? Try to identify exactly what is going wrong for troubled franchisees, Elgin says. If the franchisor says,They didn't follow the method,press on by asking in what way.You need to learn where the pressure point is,Elgin says. "What is the difficult thing to do successfully in this method?"
* How are conflicts resolved? Ask franchisors for details of a recent franchisee conflict & the way it was resolved. You'll learn a lot about the franchisor's respect for franchisees & its dedication to making them successful, Elgin says. If the franchisor says there is never been a conflict, be skeptical. "If it's over franchisees, it's had a conflict,Elgin says.
more thought: Prospects ought to ask franchisors which skills their franchisees need most, says Joel Libava, president of consulting firm Franchise Choice Specialists Inc. At lots of franchises, the most successful franchisees have similar skills--they are mostly former promotion executives or sales managers. See in the event you fit in to their winning group.
Watch for red flags
When you are speaking to franchisors, keep a sharp eye out for potential issues, from weak managerial skills to outright scams. Be positive to look at the resume of the franchisor's top management, says Joe Mathews, co-author of Street Smart Franchising & co-founder & principal of The Franchise Performance.
"Often, the people making the decisions have never owned a small business before,they says. "They have big-business goggles on, & they have a tendency to make ivory-tower decisions.
"The more [that franchisees] feel you are a heartbeat away from signing, the more information you will get." --Gordon Dupries, FranNet consultant
If a franchisor is excessively enthusiastic about signing you up without hearing much about your qualifications, that is another warning sign. Nice franchisors are selective, looking for the best-qualified candidates who possess the skills & capital needed to succeed.
Be worried about franchisors who take you aside & make earnings claims that differ from what they have said in Item 19 of their FDD. It is illegal for them to say anything more on the topic. In the event that they skirt this rule, you ought to be worried about their ethics in general, says FranNet consultant Gordon Dupries.
Ask the franchisees
Two times you have thoroughly grilled the franchisor, you are prepared to chat up franchisees. After establishing a rapport, you'll be wanting to ask hard questions--but in ways that the franchisee will feel comfortable answering. Again, Elgin has questions in mind:
You need companies that award franchises, says Dupries, not sell them.
* How well prepared were you when you opened? This query covers lots of bases, from how forthcoming franchisors were to the thoroughness of their training program. If franchisees document that they were well-prepared & that things went smoothly, that is a nice sign. Disagreeable surprises or unexpected issues likely point to weaknesses in the franchisor's support for its franchisees.
* How effectively do the promotion programs bring customers to you? Franchisors love to discuss the brand & building value. But what you need to know,says Elgin, is whether customers will be coming in & spending funds in your unit.The answer you need? "From the minute they opened, they were crowded."
* What is the financial reality? Nail down as lots of financial details as you can with the franchisees, Elgin says. You may must ask several different franchisees to get all of your questions answered. How much does it cost to open a unit? How soon are you able to start making funds? How much are you able to expect? Only franchisees can give you the actual story.
To get the best results with franchisees, don't waste their time, says Dupries. Let the franchisees know you have learned a lot about the brand already. Present yourself professionally, as a serious prospect. "The more they feel you are a heartbeat away from signing,they says, "the more information you will get.
There is another reason for making a nice impression on franchisees. Often, Dupries says, franchisors will follow up later by calling the franchisees you interviewed to ask them what they thought about you.
When you are speaking to franchisees, keep in mind to think about their point of view, which may influence what they tell you. For example, if you are speaking to a franchisee near the territory you need, they may tell you business is terrible because they desires the territory you covet to stay open to diminish his own competition or so they can purchase it later. Or some franchisees may brag about their success because they are proud to admit they are in trouble. Ultimately, Dupries says, you'll must make use of your gut instincts to pick whether a franchisee is being truthful.
Mathews also advises asking franchisees how lots of of their ideas get implemented. The answer to this query will vary from franchise to franchise--some have top-down management styles, while others encourage franchisee feedback & actively incorporate ideas from the field. If the franchisor is not receptive to feedback, you need to pick whether you'd be happy in a cookie-cutter format or you'd prefer a method in which you can be more entrepreneurial.
If feasible, try to spend a whole day with at least franchisee. Mathews says that is the only way to find out how franchisees spend their time & what they are doing to be successful. It also gives you more time to build a relationship with the franchisee & hopefully get more honest & detailed answers.
What you need to know from franchisees in the finish, Libava says, is what the franchisor does that makes it worth the fees.
There is a bottom line to being a franchisee, Libava notes. You are giving up a portion of your sales in royalties to the franchisor in exchange for its help walking your business.
Sell skin-care products or own a hotel. Groom canines, help people lose weight or do their taxes. These are a number of the opportunities in today's franchise world, which includes a boggling variety of ideas selling every imaginable product & service. How do you know which you'd truly enjoy? How do you know which represents the best business opportunity?
Five times you identify a brand you are curious about, start by requesting & thoroughly reading the Franchise Disclosure Document, or FDD, that each franchisor is legally necessary to provide to prospects. In case you don't understand everything in it, have a franchise attorney or consultant report the terms.
Then you are prepared to start speaking to franchisors. If they could only ask a franchisor questions, Jeff Elgin, CEO of franchise consulting firm FranChoice, says they would be:
* What is your number-one focus? The answer you need is 'the success of our franchisees,says Elgin.But I have gotten: Our number-one focus is our own bottom line.' That would concern me.
* Why do franchisees get in trouble? Try to identify exactly what is going wrong for troubled franchisees, Elgin says. If the franchisor says,They didn't follow the method,press on by asking in what way.You need to learn where the pressure point is,Elgin says. "What is the difficult thing to do successfully in this method?"
* How are conflicts resolved? Ask franchisors for details of a recent franchisee conflict & the way it was resolved. You'll learn a lot about the franchisor's respect for franchisees & its dedication to making them successful, Elgin says. If the franchisor says there is never been a conflict, be skeptical. "If it's over franchisees, it's had a conflict,Elgin says.
more thought: Prospects ought to ask franchisors which skills their franchisees need most, says Joel Libava, president of consulting firm Franchise Choice Specialists Inc. At lots of franchises, the most successful franchisees have similar skills--they are mostly former promotion executives or sales managers. See in the event you fit in to their winning group.
Watch for red flags
When you are speaking to franchisors, keep a sharp eye out for potential issues, from weak managerial skills to outright scams. Be positive to look at the resume of the franchisor's top management, says Joe Mathews, co-author of Street Smart Franchising & co-founder & principal of The Franchise Performance.
"Often, the people making the decisions have never owned a small business before,they says. "They have big-business goggles on, & they have a tendency to make ivory-tower decisions.
"The more [that franchisees] feel you are a heartbeat away from signing, the more information you will get." --Gordon Dupries, FranNet consultant
If a franchisor is excessively enthusiastic about signing you up without hearing much about your qualifications, that is another warning sign. Nice franchisors are selective, looking for the best-qualified candidates who possess the skills & capital needed to succeed.
Be worried about franchisors who take you aside & make earnings claims that differ from what they have said in Item 19 of their FDD. It is illegal for them to say anything more on the topic. In the event that they skirt this rule, you ought to be worried about their ethics in general, says FranNet consultant Gordon Dupries.
Ask the franchisees
Two times you have thoroughly grilled the franchisor, you are prepared to chat up franchisees. After establishing a rapport, you'll be wanting to ask hard questions--but in ways that the franchisee will feel comfortable answering. Again, Elgin has questions in mind:
You need companies that award franchises, says Dupries, not sell them.
* How well prepared were you when you opened? This query covers lots of bases, from how forthcoming franchisors were to the thoroughness of their training program. If franchisees document that they were well-prepared & that things went smoothly, that is a nice sign. Disagreeable surprises or unexpected issues likely point to weaknesses in the franchisor's support for its franchisees.
* How effectively do the promotion programs bring customers to you? Franchisors love to discuss the brand & building value. But what you need to know,says Elgin, is whether customers will be coming in & spending funds in your unit.The answer you need? "From the minute they opened, they were crowded."
* What is the financial reality? Nail down as lots of financial details as you can with the franchisees, Elgin says. You may must ask several different franchisees to get all of your questions answered. How much does it cost to open a unit? How soon are you able to start making funds? How much are you able to expect? Only franchisees can give you the actual story.
To get the best results with franchisees, don't waste their time, says Dupries. Let the franchisees know you have learned a lot about the brand already. Present yourself professionally, as a serious prospect. "The more they feel you are a heartbeat away from signing,they says, "the more information you will get.
There is another reason for making a nice impression on franchisees. Often, Dupries says, franchisors will follow up later by calling the franchisees you interviewed to ask them what they thought about you.
When you are speaking to franchisees, keep in mind to think about their point of view, which may influence what they tell you. For example, if you are speaking to a franchisee near the territory you need, they may tell you business is terrible because they desires the territory you covet to stay open to diminish his own competition or so they can purchase it later. Or some franchisees may brag about their success because they are proud to admit they are in trouble. Ultimately, Dupries says, you'll must make use of your gut instincts to pick whether a franchisee is being truthful.
Mathews also advises asking franchisees how lots of of their ideas get implemented. The answer to this query will vary from franchise to franchise--some have top-down management styles, while others encourage franchisee feedback & actively incorporate ideas from the field. If the franchisor is not receptive to feedback, you need to pick whether you'd be happy in a cookie-cutter format or you'd prefer a method in which you can be more entrepreneurial.
If feasible, try to spend a whole day with at least franchisee. Mathews says that is the only way to find out how franchisees spend their time & what they are doing to be successful. It also gives you more time to build a relationship with the franchisee & hopefully get more honest & detailed answers.
What you need to know from franchisees in the finish, Libava says, is what the franchisor does that makes it worth the fees.
There is a bottom line to being a franchisee, Libava notes. You are giving up a portion of your sales in royalties to the franchisor in exchange for its help walking your business.
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