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Should a prospective franchisee talk with franchisees that have franchises with the same company?
Some would say that input from current (and past) franchisees is the most important part of due diligence. I, on the other hand, would say that it is important, but by far, not the most important. Why? For a variety of reasons.
First, as mentioned in the past, the concept of ‘good fit’ with a franchise should be a critical issue to resolve. So, whereas, a buyer might be very well suited to own a particular franchise, a current or past franchisee contacted for information may not fit as well with the business.
Second, over time, many franchisees feel that they could do just as well (if not better) in a given business. In other words, once the franchisee understands how to operate a given ‘system’, they may feel that the franchisor’s presence is gaining them very little. And candidly, in many cases that is true. Comments from these franchisees may or may not be tainted.
Third, disgruntled ‘ex’ franchisees are most assuredly going to bad mouth the franchisor and its offering.
Serious due diligence should focus primarily on two things: the buyer’s potential ‘fit’ within the system, and the credibility (the proven success) of the model.
For more information on franchise due diligence, visit Nick Bibby’s website, http://www.bibbygroup.com.