Part of doing your due diligence when analyzing a franchise opportunity is contacting both current and former franchisees. Talking to franchisees from the company you are interested in allows you to get more candid answers than those provided by the franchisor. Item 20 of the franchise company’s Franchise Disclosure Document (FDD) will provide a list of both current and former franchisees. Following are ten important questions to ask them:
1. Are you happy with your franchisor? Ask them to elaborate as to why they are satisfied or not.
2. How long did it take for you to realize a return on investment? Ask yourself if you are willing and able to support yourself during this time without being able to rely on profits from sales.
3. What are your approximate earnings and are they in line with your expectations? It is difficult to ask someone how much money they make but finding out is critical to your long-term financial future.
4. Did your franchisor adequately estimate the amount of operating cash that you needed?
5. Was the training your franchisor provided thorough and did it sufficiently prepare you to run this business?
6. Were there any hidden franchise fees or unexpected costs? If so, what were they?
7. Is your territory big enough to hit your goals?
8. Are there restrictions on the products you sell and use in your business? Are you required to use designated vendors?
9. Does the franchisor advertise as much as it said it would?
10. What type of business experience, education, and skills did you possess before buying this franchise?