The problem with talking to franchisees

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Before buying a franchise, just about everyone will tell you to talk to existing franchisees. But, what exactly should you look to gain from these conversations?

“Talk to existing franchisees and ask them what they think of the franchise.” This is a piece of advice that every prospective franchisee receives. And it is good advice – buying a franchise without speaking to people who are already in the system would be a bad idea.

But, there is no doubt that conversations with existing franchisees can easily leave you more confused and uncertain than ever.

Say, for example, that you have an opportunity to join a great franchise organisation with solid numbers, a fast-growing network and a long list of applicants. It seems like the sort of opportunity you don’t want to pass up, but before signing on the dotted line, you decide to speak to a couple of franchisees, just to make sure that you are in fact making the right decision.

KEY TAKEAWAY

Talking to existing franchisees can leave you more confused than ever. In order to get a clear view of a franchise, speak to as many franchisees as you can – and ask them as many questions as they’ll allow.

To your surprise, a good portion of the people you speak to are quite negative about the franchise. They complain about the franchisor, the high royalties and the mandated store refresh.

What should you do now? Is this a good opportunity or not? The problem, of course, is that talking to franchisees is a guaranteed way to get a very subjective (and often skewed) view of a franchise.

Consider the example above. The unhappy franchisees might have signed on when this was a much smaller and informal franchise organisation, so the sudden increase in marketing costs, royalties and a required store upgrade might not sit well with them.

If this really is a great franchise, they’ll probably get used to the new way of doing things, and will eventually stop grumbling about the changes. On the other hand, this could also be a franchise that is growing too quickly, and consequently neglecting existing franchisees while simultaneously placing tough financial demands on them.

The point is this: You can’t place too much value on the opinion of a single franchisee. There is a decent chance that a franchisee will ascribe his or her success to their own management skills and decisions, and any problems to the franchisor.

To get a decent overall view of a franchisee, you need to speak to as many franchisees as possible. The more people you speak to, the more balanced the opinions will be. If you speak to 20 people and four or five are unhappy, there is a good chance that this is a franchise worth investing in. However, if 16 are unhappy, you should probably walk away.

You should also try to ask specific questions when interviewing existing franchisees. Make a list of questions and don’t accept evasive answers. The more you probe, the better your understanding of the franchisee’s situation will be.

Source: https://bizconnect.standardbank.co.za

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