Experience franchising first hand

A valuable part of any research before investing in a franchise opportunity is to talk to existing franchise owners, who have already followed the same path you are about to embark on.

One of the most useful checks when researching a franchise opportunity is to talk to a company’s existing franchise owners, as they will be a font of invaluable first-hand, non-corporate opinions of what it is like to run the franchise.

By talking to them, you will be able to receive realistic insights into how many hours you will need to put in to make the business succeed, how long you can reasonably expect to wait before breaking even, how much operational and working capital will be needed to run the business, what sort of challenges you may encounter, how good the training and support is, how the franchisor relates to individual franchise owners once they have signed up – and much more in the way of operational realities.

Many franchisors now make a point of insisting that prospective franchise owners speak to their existing operators before making a decision – and indeed to spend time with them in the field.

When you do speak to franchise owners, always remember that although they are franchise owners, it does not mean that you take everything they say as gospel when making your decision.

Those you talk to may not be typical franchise owners; they may have started in a better location or at a better time of year, such as Christmas; they may have had pilot concessions no longer available or the advantage of a superior market situation when market conditions may have been better.

It could be that the franchisor was able to allocate greater support resources during the first phase of establishing its franchise network, thereby giving those early franchise owners better prospects for success, which cannot be replicated in a larger operation where resources are more stretched.

The franchise owners you contact may be new to the business themselves and be at a point where they anticipate rather than realise the profits and turnover the franchisor has promised. They could, therefore, be giving you an impression of the business, which is not totally realistic.

Worse still, they may be related to the franchisor, could be their friend, a former Director or may even be paid a commission for every franchise owner recruited after speaking with them.

Alternatively, you may be talking to a franchise owner who is unsuited to the business and you will hear negative tales, which will not be a fair reflection of the opportunity. Some franchise owners simply do not put in the hard work and dedication needed to grow a business and are very quick to blame the franchisor for their own shortcomings.

The advice from former franchise owners turned Franchise Managers may be useful, but do not rely on them for guiding your investment decision, which calls for truly independent franchise owners.

Of course, apparently ‘independent’ franchise owners may be on the payroll indirectly. Some franchisors groom certain top franchise owners as standard referees for new applicants. In some cases, they simply act as the network’s only referees, which is rather limited if you want a ‘no-holds-barred’ impression of reality.

So even with franchise owners, all may not be what it seems on the surface. Even here, checks are recommended – and close questioning of franchise owners can often reveal any inconsistencies.

However, talking with franchise owners and preferably spending a day or so with at least one of them is mandatory for a safer choice. You need to find out from the ‘horse’s mouth’ if the training prepares you adequately for the business, if the franchisor honours support promises, if the product is good and in demand, how much work needs to be put in and whether there is any profit to be made – and how soon.

You will also be able to get some insight into how much working capital you will need during the formative stages of the business, when you are coping with having given up paid employment.

So make sure you spend plenty of time and effort talking to existing franchise owners, as they’ll give you the best real-life insight into life ‘being your own’ boss, which is crucial when making your decision to invest in a franchise opportunity.

Written by Fraser McKay