#1 What about you?
But what are the best franchises anyway? You can’t always tell! One of the things I’ve noticed a lot about underperforming Franchisors is the balance of the initial encounter between the prospective franchisee & the franchisor. It might be on the phone or at the first meeting but there’s a red flag here for you to look out for. Can you guess what it is?
Let’s say you’re on a first date. When it’s over how much does your new date really know about you? Did they show much interest? If they didn’t ask you some questions then how do they know that if you are suitable? Well, if they haven’t asked you any questions then there’s a good chance they don’t care how suitable you are. Just like the first date who just wants to get his leg over the disinterested franchisor is disclosing that they really just want your money.
#2 Speaking to others
Another communication issue is your willingness to enter into dialogue with the rest of the network. So that you can check if your fancied franchise is one of the best franchises. These people, just like your feisty ex colleagues in your previous job can add great value to you, or take great value away, certainly they can make the difference between you enjoying it or not. You need to talk to your own choice of franchisees, not the ones the franchisor suggests. I have found that many franchisors are concerned about this, but hey – you’re a grown up, you know that not everyone will succeed don’t you? Don’t you? Well they won’t so what you are looking for in these conversations is the credibility behind whatever statements a failing franchise makes and then comparing that to the ones who are successful. If you can’t get direct access to anyone in the network, including the drifters, then you need to be very worried about the business model.
#3 Lack of realism
Hopefully your franchisor is informing you know about the likely financial returns. Thats one way to judge which are the best franchises anyway. What matters here is that whatever is said is based upon the performance of others in the network or a well run pilot scheme that you can examine. Franchisors quoting sky high returns is perfectly fine, so long as that’s representative of what is currently happening in the network. What you’re looking for here is the network average and it’s potential maximum return if you’re brilliant at it. Chances are you won’t be the top performer, so base your expectations on the network average not an enthusiastic franchisors forecasted maximum theoretical returns. But you already know this don’t you?
#4 Super fast network growth
Good and bad exists here for you as a potential new franchisee. When franchise networks are growing super quick there are always growing pains felt by everyone. The franchisor needs to scale up quickly to provide the help and support that each new franchisee needs. Bear in mind this isn’t about the initial training because most franchisors can train multiple people at the same time. No, what I’m referring to here is the myriad of conversations you’re going to need to have whilst you’re settling in. All the best franchisors have some elasticity in their company to spend that time with you, or they have someone dedicated to the role. Super fast growth franchisors often get overwhelmed and that means your critical care needs early on can be ignored. However, the flip side to this is that the franchisor is (hopefully) making money on all those initial franchise fees coming in which allows the franchisor to buy their way out of difficulties. With a big influx of cash comes the ability to bring in the talent on payroll or hire outsourced help to look after you. You just need to work out the scale of the support issue when so many new franchisees are joining at once.
#5 The final red flag is an all too common issue amongst the worst and even the best franchises
Whilst doing your due dilligence on the Directors and the company (you are going to do your due diligence aren’t you?) you discover that the owner of the company is an ex convict. You may think this is rare, I can tell you that it isn’t rare. The franchise industry is a honey pot that attracts con artists like no other. So, be sure to establish the credibility of whoever you are dealing with or whoever owns the company. What’s their background exactly? Ask them directly, have they ever been to prison or disqualified as Directors or been personally bankrupt. If you discover anything like that – you need to get the hell out of there. Leopards don’t change their spots my friend! So ask direct questions – this is your future life we are talking about so get stuck in and check all of the answers given with rigorous background checks on the senior Directors. That’s the biggest red red flag there is.
Finally bear in mind that this is not an exhaustive list, but it’ll get you started!