Talking with Current Franchise Owners
Reading through a FDD is a key part of your research, but it can’t answer all the potential questions you might have about how it is to actually operate a given franchise. The best way to do this is actually to start talking to current franchisees. The best way is to this is to call or visit a franchisee, don’t just email them. You might need to be a bit persistent, but if you are then you can get all of your questions and concerns answered.
To find out where how to contact franchisees you should go into the exhibit section of the FDD, where most franchisors include a list of current franchisees, their complete name and contact info. If this information isn’t included then you should ask the franchisor how you can contact current franchisees. In addition, most franchisors list franchisees “who have been terminated, canceled, not renewed or have voluntarily or involuntarily ceased to operate the business during the current year.”
It's difficult to give an absolute number of franchisees who should be called. The size of the system has a lot to do with it. If there are only five franchisees, you should call all five. But in the larger systems, you'll have to use your judgment. Try to get a good cross-section of franchisees, and don't forget to call several of the franchisees who voluntarily or involuntarily left the system.
What will you talk to them about? You will ask them about all the things that are important to you. Glenn and Connie Schenenga, Future Kids (computer training) franchisees, spoke to many of the 40 or 50 franchisees listed and asked them questions like, "Are you making any money? Are you happy? What are the positives and negatives of the business?" Pretty basic questions, but ones that every prospective franchisee would like to know the answers to. You might also inquire about the hours involved in running the business, the relationship of franchisee and franchisor and, of course, when the franchisees turned their first profit.
If you contact a wide cross-section, you will undoubtedly encounter struggling, surviving, successful and super-successful franchisees. Try to determine, as best you can, why some are not succeeding. Is the franchisee taking advantage of the corporate support? Is the franchisee putting in the time? Perhaps the owner is an absentee one. Is the franchisee out selling? The point is to try and find out if the problems lie with the franchisee or with the franchise system.
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Where Is The Best Location To Open Your Franchise?
One critical factor to consider when you are thinking about opening a franchise is whether your location is suited for a franchise and which franchise suits your area the best. One thing that makes this consideration slightly easier is the notion of franchise territories. Most, but not all, franchises in the US are set up so that they grant exclusive territorial franchise rights to their franchisees to help prevent the issue of geographic competition.