Franchisor Due Diligence
What kind of due diligence should a franchisor perform on a prospective franchisee?
The simple answer is: 'A lot'. But that is rarely the case.
Franchise consultants worth their salt may preach to their franchisor clients that they should stick to a plan of vetting prospects, but for the most part, good luck seeing that kind of a plan in action.
It is a simple, but sad, fact of life that most franchise systems have some glaring deficit, and often that deficit is found in the marketing area. Franchise marketing, indeed, the VP of Franchise Development is still and always will be the hottest seat in a franchise organization. As is the case with most groups interested in growth through sales, when things don't go well in a franchise company, all fingers normally, but wrongfully, point to the person responsible for sales. And with enough fingers pointing for a long enough time, a certain head will role.
Thus the kind of 'due diligence' needed to be performed by a 'quality franchise company', the kind of due diligence that means finding out if the candidate should be 'part' of the system, can be easily overlooked. It’s a franchise fact of life, and therefore, it is vitally important that prospects provide their own due diligence when buying a franchise.
