Delayed Shipments Ruining Sales. Inability to Reach Customers. Can't Take a Vacation. Impossible to Use Software. No Way to Make Money.
These are not the words I want any new business owner to utter, especially one of my clients. And they are why I tell my clients to do their homework before buying a franchise or becoming a licensee or distributor.
You’ve probably worked to figure out what type of business fits your personality (hopefully) and experience to help you choose your franchise or has narrowed you down to a few choices to consider.
And through this process, you’ve probably heard most of the good, some of the bad, and likely little of the ugly involved with these franchises. As your lawyer, I can tell you the legal-side details in your franchise disclosure document or franchise agreement.
But how much do you know about the day-to-day operation of your potential franchise or other business?
About the nitty-gritty, pain-in-the-butt details that all business owners deal with, and that in your case will be rigidly controlled by the franchisor. Those that do not make it into writing, how do you learn about those?
Questions like:
-How fast do you usually receive delivery of supplies that you may only buy from the franchisor?
-How do you connect with customers in a social media driven society when your franchisor doesn’t allow you to have your own business Facebook/Twitter page?
-What kind of profits can you actually expect to see for a territory like yours (besides the franchisor’s rosy picture)?
-How do you take a vacation when you cannot close your business for more than 2 days?
-How does the franchisor treat small versus large franchisees in the system?
-How does the franchisor react if your business is struggling?
These questions that can best be answered by calling the other existing franchisees. Use the list provided in the Franchise Disclosure Document to see their names, phone numbers and territories.
Cold-calling business owners you do not know without an introduction might sound awkward to you. And that is understandable. But the existing franchisees expect your call. Call as many as you can!
The existing franchisees likely made these same calls when they were considering the purchase – and went into the deal better educated than otherwise. Call them, ask the hard (or even strange) questions you have. You cannot call too many. More information allows you to make a better investment decision.
This advice transfers to any business owner considering becoming a distributor or licensee of another business’s products or services. You may not be entitled to automatically learn as much information about other distributors (names, phone numbers, etc.) as you would for a franchise, but a simple Google search should yield a decent list of other distributors or licensees for you to contact.
When you consider a franchise, distributorship, or licensing agreement - call as many other existing businesses as you can to find out about these details. As I tell my clients, you cannot call too many!
Posted March 22, 2013, 3:30 pm.
