A Conversation Guide for Speaking with Franchisees

Questions to Ask; Perspectives to Consider

Congratulations! You’ve found a business that looks promising, and which seems to fit well with what you’d like to accomplish as a business owner. Now it’s time to double-check your assumptions by speaking with existing franchisees. As a general rule, you will find franchisees to be open, honest and willing to answer all types of questions, including the most important questions about sales figures and bottom line performance.

This guide is intended to provide a framework for your conversations so you can gather consist, valuable information.

Please be respectful of franchisees’ time

Franchisees have many franchise candidates calling them all the time, and they donate their time in the same way others donate money to charity. And like money, their time is finite and valuable. Please respect their time by doing the following:

  • Prepare your questions in advance.
  • Limit your conversation with a franchisee to about 15 or 20 minutes. Spread your questions out over multiple franchisees.
  • Please request an appointment after finding out the best time for them to speak.  Just because you reach them by telephone or they are on premise when you stop in, that doesn’t mean it’s a good time for them to speak with you.
  • Please be flexible. Some franchisees may want to speak with you during off peak business times.
  • Be brief.

Franchisees in different business lifecycle stages can offer different perspectives

When you speak with franchisees, it’s important to keep in mind how long that owner has been in business. New franchisees and veteran operators can have wildly different perspectives. Where they are in the lifecycle of their business colors the feedback they may give you. You have to read between the lines.

  • New franchisees have just begun to realize a dream by opening their business, and they are often excited and effusive. They can shed a lot of light on the process of starting the business, the support they received to get ready, and the welcome they received from the franchise community.
  • For franchisees who have been in business for 6 months to 2 years, the initial excitement has usually faded and they are in the process of grinding their way through their learning curve. They are often receiving a lot of support, but can be frustrated by all the effort it takes to master the business. This is perfectly normal.
  • More experienced franchisees should have hit their stride, and can share great information about what it took to win, and the strengths and challenges of the business.
  • Franchisees who have been running the business for a long time tend to fall into one of two categories: They are either deeply involved in the leadership of the franchise community, mentoring other franchisees and providing advice to the franchisor, or they are preparing to retire. These franchisees often mastered the business model so long ago that they no longer see the value of the franchisors’ support. They are also sometimes wedded to older versions of the business model. Their insights can be invaluable for helping you understand the history of the brand and how it has evolved.

Make note of where each franchisee is in their learning curve and balance their feedback accordingly.

Determining profitability

Even if a franchisee is relatively new in the business and may not be generating positive cash flow, you can ask them financial questions and they should know the averages and norms. They should know both what a high volume and low volume franchise looks like. Remember, when asking financial questions it isn’t important to ascertain how well each franchisee is doing financially. It is to determine how well you will do financially. Franchisees are less guarded and more apt to want to answer questions about the franchise system’s norms and regional or national financial averages than about what the results they are specifically generating. You can always ask if their financial results are meeting their expectations.

Since most franchisees finance and operate their businesses differently, their financial statements may have wide variations. Some will more aggressively write off expenses such as autos, trips, and medical insurance. Some will carry more debt than others. Some franchisees will pay themselves a salary, others will take no salary and pay themselves dividends. Some employ a manager and others are owner operated. Your goal is to ask questions that will give you consistent information.

We recommend you get to what many franchisors call “total owner benefit.” In other words, assuming franchisees take their entire benefit in one lump sum cash distribution at the end of the year — before debt, depreciation, amortization, and paying the owner’s salary and benefits and aggressively writing off personal expenses — how much money would there be left over for them to take home?

How Many Franchisees Should I Call?

There isn’t any magic number of franchisees you should call. Most franchise candidates call between 3 and 6 franchisees before they have heard enough consistent and predictable information. Franchise candidates with a higher risk tolerance seem to call fewer and more cautious franchise candidates will call more.  It’s important that you hear consistency of information and manage your expectations accordingly.

Recommended Questions

Below are sample questions for you to ask franchisees, adapted from the Amazon.com best-selling book on franchising, Street Smart Franchising. These are intended to help you draw an accurate picture of the franchise opportunity.

  • How long have you been a franchisee?
  • What first attracted you to the brand?
  • How do you rate the effectiveness of the franchisor’s training and support?
  • What does it take to win as a franchisee?
  • What are the greatest challenges franchisees face?
  • How does the franchisor help franchisees overcome these challenges?
  • How do you differentiate from your competition?
  • How would you describe your relationship with the franchisor?
  • How would you rate the value of the ongoing training and development you are receiving from the franchisor?
  • Before debt service, how long does it take to achieve break-even?
  • What are customers saying about your restaurant?
  • How available is the franchisor’s support team to answer your questions and offer assistance?
  • Knowing what you now know, and if you could do it all over again, would you invest in the franchise again? Why or why not?

Check in with your franchisee recruiter often

Reach out to your franchisee recruiter weekly to fill them in on what you are hearing from franchisees. The recruiter can help make introductions to facilitate conversations, and can also provide feedback to help you get the most out of your interviews. The goal is to give you a thorough understanding of what you can expect as a franchise owner.