Who Can You Trust, When You Don't Know What You Don't Know?

In Search of Truth

Perhaps you are a potential franchisee and you are schlepping through the "homework" of deciding whether or not franchising is for you. You are carefully deliberating whether or not to catapult your life and career into a new direction or simply return to the way it was. You talk to the franchisees, you attend Discovery Day, you talk to the officers and CEO of the company, your attorney reviews your UFOC, and then it hits you. You realize everyone you talked to has their own agenda, their own unique way of looking at the world. Some have a vested interest in your joining the franchise, some don’t. You have lots of feedback, but how much of it can you trust?

The franchisor’s representative

The franchisor’s rep is the ambassador of the brand. He does a fairly good job of answering your questions and walking you through the investigation process. But you didn’t feel like you were thoroughly screened. You have had tougher interviews applying for jobs. Considering how much is on the line, you don’t really know whether or not you are right for the business. What happened?

Then you realize, the franchise salesperson is just that, a salesperson. Their pay is tied to whether or not you join the chain, regardless if you succeed. You could fail, and they still get their commission. Additionally, they have never run the business you are about to buy. They may get what it takes to win theoretically, but they have never done it. This doesn’t mean you can’t trust their feedback, but it does mean you have to balance their feedback with other information.

The CEO and Officer’s of the Company

You went to Discovery Day and met some wonderful people who say the right things and look the part. They tell you that some people make it and some people don’t. They say those who don’t are the ones not following the system. Those who are winning are the one’s following the system. This sounds right at first, then it hits you…the franchisor seems to be accepting credit for the franchisees who win and distancing themselves from the ones who are struggling. They seem to be taking credit for the victories and distancing themselves from the setbacks. Then you think, every business has a typical bell curve distribution. There are 25% of the people who are so good, put them anywhere and they win. You think surely these aren’t franchisor victories, these are franchisee victories. But then you remember, the franchisor successfully brought them into the system. Good for the franchisor you think. Then there are 25% of the people who are so incompetent, put them anywhere and they screw up. Surely these aren’t franchisor failures, are they? Then you think who brought them into the system? Bad for the franchisor. So you decide to discount the top and bottom 25% and look towards the middle. Isn’t this what the system is really producing on average?

The Franchisees

You talk to the franchisee community. Surely you will get some objective feedback from them. Some tell you that they are less than a year in business and they are struggling. They say they are working the system but the system isn’t working. Other, more mature franchisees seem to producing just fine. They say the franchisor just leaves them alone. They don’t need the franchisor and the franchisor stays out of the way. Other franchisees say they work closely with the franchisor that is responsive and adds tremendous value to their business. Who is right? Who is wrong? Who do you believe? You realize that from their own perspectives, they are all right. The franchisor relationship is what they make out of it.

Your Accountant and Attorney

So you hire an accountant and attorney to protect your downside. They go over with you all the risks and why you shouldn’t do it. You are left de-energized and doubting yourself. What happened? Then you realize, you hired them to help you identify and eliminate risk. There is only one way to completely eliminate risk, which is to not do it at all. They are just doing their job, but things won’t be as peachy as the franchise salesperson would lead you to believe nor as bad as the picture painted by your attorney.

So where can you go for objective information?

No where. This is not bad, just the way it is. Everyone has their opinion. These opinions are in orbit around the truth much in the same way the planets are in orbit around the sun.

The truth lies somewhere in the middle.

There is no such thing as a free lunch:

Often times the "Free Services", are free to the consumer because they are paid for by the Franchisor. This is not necessarily bad; however it is a reason for extreme vigilance and cause for more homework. Since the Franchisor is paying for the consulting it is probably a case of highlighting the positives and minimizing the negatives. Do not be overwhelmed by the "great testimonials", "thousands of successful franchisees" and "continual support and training". These claims may all be true, but it is best to speak with the CEO, the trainers, and most importantly other franchisees that are where you will be a few years down the road.

Ask to speak to the HOT franchisees as well as the not so hot:

Ask questions:

Why do you feel like you are successful?

How is the support and training?

Would you recommend this opportunity to a potential franchisee?

Knowing what you know now, would you make the same decision to invest if you had it to do over again?

By asking these questions of the most successful and the barely in the game franchisees you will be able to assess whether, the successes and failure are due to attitude, training, management style, lack of training and or knowledge. Ask the same questions of the CEO and trainers. Look at the big picture and past the immediate enthusiasm and initial excitement.

Investigate Everything:

You did a lot of soul searching to decide franchising was right for you. You need to ask questions about everything. In this case of choosing a consultant paid or not knowledge is power! What does the consultant know that you don't? What is the consultant's client satisfaction rate? What is the cost? How much work will the consultant do?

Whether you choose a consultant that you pay or one that is paid by the franchisor, be certain the consultant is looking out for your best interest. If you are unclear about something ask questions. Don't forget you are about to invest a substantial amount of blood, sweat, tears and CASH; No question so go unanswered. There are a lot of ways to research both franchises and franchise consultants. Use the net, ask other franchisees in your area, consult the library, and the local book store.

Franchisors paid consultants are not necessarily better or worse the consultants paid by the potential franchisee...but let the buyer beware!