There’s an important discovery process to becoming a franchise owner, and one of the important steps is called “validation.” During validation, you have the opportunity to talk to owners who run franchises for the company and ask them questions, so you can better determine if it’s the right fit for you.
The first important thing to keep in mind is: “Don’t start calling franchisees of a company until you are invited to do so,” advises Davis Lewis, vice president of franchising for Express Employment Professionals. “Each company has its own process for this, and one of the things you will be evaluated on is how well you follow the process. People who can’t follow a process are typically not well suited for a career as a franchisee.”
When the time is right, you can find a full list of franchisees in the company’s Franchise Disclosure Document (FDD). Some companies may also provide a list of current franchises separate from the FDD, but you have the right to speak to as many as you like and don’t have to feel confined to that list.
Getting the Info You Need
Before you pick up the phone, be sure you have your list of well-thought-out questions in front of you. Franchisees are busy business owners, and they won’t have a lot of time to spare for someone who is unprepared. To make sure you get the information you really need, include these must-ask questions on your list:
- How much money can I expect to make? To get a full financial snapshot, ask:
- What was your revenue for the past year?
- How does that compare to previous years?
- What is your gross profit/gross margin?
- What was the net cash flow to you before taxes?
“Be sure you understand what a “percentage of sales” means and what your gross profit/gross margin number is,” David notes. “Most franchisors take a cut from your top line, so corporate is paid first, typically 7 to 10 %. Other companies, like Express, do not work that way. Be sure to ask this question: “If your franchise sells something with zero markup, would you have to pay royalties on that sale?” For example, if you own a hardware store, would you have to pay the 10% markup on a hammer even if you sold it for no profit?”
- How much time do I have to invest in the business to make that amount of money? “Your questions around this should reflect your personal goals – are you trying to maximize income, or are you motivated by other lifestyle criteria, such as taking a few months vacation each year, or being able to visit your children at school once a week?” David notes. “Ask how the franchise schedule will affect your lifestyle. If you are looking to take three months vacation and all the franchise owners tell you that they have cots in their offices because they practically live at the business, you won’t be well aligned with the demands of that franchise.”
- What’s your relationship with corporate headquarters and what is the level of support they offer? David recommends asking these critical follow-up questions: “If there is a problem in the store and they request that someone from corporate make an in-person field visit, will they do that? Does it take a month to schedule that visit? How responsive are they?”
- How well did their training program equip you to hit the ground running?
“Some companies prepare people well for the transition to franchisee, others do not,” David explains. “At Express, we offer an exceptional training program, because we feel it’s important to invest in the development of our people.”
- Would you do it again, knowing what you know now? Like any business, franchisees are going to have things they like and dislike about their business. “But if someone feels strongly enough that they would not work with the company again, that’s a red flag,” David advises. “One of the trends we are seeing at Express is franchisees who expand and open a new territory. They want to do it again, because they know the system works. That’s a great thing to see.”
For more information on Express Employment Professionals and the fast-growing staffing industry, visit ExpressFranchising.com.