Due Diligence

by Steve Hearon

What is the most important aspect of your due diligence while investigating a franchise? Without question its actual conversations with franchisees. That is going "right to the source" for accurate, front line data you can base your decision on (assuming you already believe in the franchisor's ability to train and support you, and you feel the brand is strong). Most franchisees know that an actively growing system will involve prospects calling them, and, for the most part adding units helps them - the only exception to this being when a unit is right next to them and they feel it may be a "threat". For this reason you want to make sure to call both in market and out of market franchisees for their opinions. So, once you have your list of franchisees to call (they should all be listed in the Franchise Disclosure Document), what should you ask?

Here is a starter list for you that should give you a range of responses to evaluate and get a sense of whether or not this system is for you.

- How long have you been in this business? (it helps to call new and mature franchisees for rounded perspective)
- What are you enjoying the most about the business? The least? Why?
- What is your biggest challenge week in and week out? Why?
- How has your previous career experiences helped you in this franchise?
- Are you satisfied with your current lifestyle?
- Do you expect your lifestyle to improve in the next 2 years?
- Is your business growing?
- How is your relationship with the franchisor? Why?
- How was the training?
- How is the ongoing support?

and the most important, most revealing question..."would you do this all over again if you had another chance...why? or why not?"

Note the why as a follow up to many of the questions. Taking the surface, first pass answer can often give you the wrong impressions. It's important to dig down one more level to determine if this particular franchisees own personal strengths or weaknesses are the real issue, or whether it may be a systemic issue. For a great resource and to give you a wider range of data than you could ever collect on your own in a reasonable amount of time, Franchise Business Review is an excellent source of data. Their surveys include the questions above and more, and in most cases you will receive the answers from dozens, if not hundreds of franchise owners. See "Franchise50" or "Franchise Business Review" for more information.

Steve Hearon
VP of Development
CertaPro Painters

Learn more about CertaPro Painters at topfranchises.franchisebusinessreview.com.

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