Money-making franchise opportunities have been the focal point of this 3-Part series.
In Part 2, I shared information and tips on choosing franchise opportunities you can (hopefully) make money owning. Feel free to review the article again.
Part 1 included tips and more on where to find franchises, both offline and online. Remember?
In Part 3, I’m going to share some of my top franchise research tips. The type of research that will enable you to get the answers you need about the franchise opportunities you’ve chosen. Answers pertaining to money. Your potential to make money as the owner of a franchise business. Your potential to be the King of your franchise business.
Ready to begin?
Money-Making Franchise Opportunities Part 3: Research
I’ve written dozens of articles on franchise research over the years.
For instance, in an article I wrote for The U.S. Small Business Administration, I offered tips for doing research on young franchise opportunities.
Call the folks that have already invested their own money into the franchise concept you’re thinking of investing in. If it’s fairly easy to do, pay an in-person visit to one or two of these franchise owners. Hang out with them for a few hours. See if you can picture yourself doing what they do. Ask great questions. Here’s a few:
- “What is your professional background?”
- “Why did you decide to get into franchising?”
- “Why did you choose this particular franchise to purchase?”
- “Are you happy with the support you are getting?”
- “What’s your competition like?”
- “What do you wish you would have known before you bought this franchise?”
Doing franchise research the right way is not difficult. What is difficult is taking the emotion out of your decision making process, and only focusing on the facts.
The last question I suggested asking…the one about what current franchise owners wished they would have known before they became owners, is one of the most powerful questions you can ask. Make sure you do. Their answers could save you thousands of dollars and/or hundreds of hours of work. (Think about it)
Research Tip #1: Make sure you talk to a variety of existing franchisees. This is how to get a good list of owners to call.
The best way to find out if franchisees are making money in the franchise opportunity you’re thinking of buying is by simply asking them…lots of them. Because if a sizable number of franchisees are making money-the kind of money you’re hoping to make, you’ve just increased your odds of becoming a profitable franchisee.
But, there’s a right way to ask them about The Money and there’s a wrong way.
Read my Entrepreneur.com article to learn how to ask The Money* question.
*This question: “How much money are you making annually as the franchise owner?”
Research Tip #2: If you want to find a franchise that will be a money-making franchise business for you, ask every franchisee you contact The Money question. In addition, ask them how long it took them to get to break-even. Ask them if they’re making what they hoped they would be making as the owner of a franchise. Ask them if they think your chances of making money as an owner are good. Don’t be shy. You’ll be glad you asked these questions.
More On Franchise Research
Most people have no idea how to do franchise research.
Think about it: How could someone know how to do something they’ve never done before?
When you were 5 years old, did you know how to ride a bicycle?
When you bought your first car, did you know how to do it?
Did you know how to pick a college?
Guys…did you know how to choose a quality diamond engagement ring?
I could go on, but
My point being, if you have never gone through the process of purchasing a franchise business, how would you know how to do franchise research?
Real franchise research.
Unless you were taught how to do it.
Which is what I’m doing now.
Ask Franchisees This Question As Part Of Your Research
I just finished putting together a very comprehensive online franchise course.
The course contains an entire Module on franchise research…everything you need to know about doing powerful research on the franchise opportunities you chose is included.
Specific questions that need to be asked of every franchisee you contact are provided, along with specific techniques on when and how to ask them.
Here’s one-it’s from the course:
Do you have repeat business? If so, do you have more or less than you originally thought?
A franchise with repeat business is a franchise that I’d want to learn more about. Would you like to know why?
Here’s why: New customer-new client acquisition is a huge expense. But, if you can keep those customers/clients coming back-and they make multiple purchases, the expense can be worth it. Plus, with today’s technology, it’s becoming easier and easier to stay in touch with existing customers. You can offer promotions (with an email newsletter, for example) that keeps your franchise business top of mind so when they’re ready to purchase again, they’ll think of you.
Not all franchise businesses have repeat customers. If the franchise you’re looking at doesn’t, it’s okay as long as the revenue from their single purchase is significant.
For example, if you owned a property restoration franchise, you wouldn’t expect to see the same customers over and over again. How many times can one’s water heater blow? If there’s a fire, it’s a one-time disaster. Etc.
But, if you owned a retail service business, or a food-service business, repeat customers are what your business thrives on.
If you’re looking at a franchise opportunity that needs repeat customers, find out if the current crop of franchisees feel that they’re getting their money’s worth….that they’re getting their fair share of repeat customers. After all, they’re paying marketing fees to their franchisor, presumably to help keep the flow of those repeat customers coming in.
Questions To Ask Franchise Representatives
Doing powerful franchise research, which is what I’m teaching you how to do right now, includes gathering information and facts from another person’s perspective.
Franchise representatives can be a fantastic source of information. You just need to ask them open-ended questions. You’re not looking for a yes or no answer here. You’re looking for details and hopefully, insights.
If you ask the questions below, which I also grabbed from my online franchise course, you’ll be well on your way to getting the information you need to make an intelligent, fact-based decision on the franchises you’re looking into.
1. “Can I have concrete examples of problems your franchisees have experienced, and how your employees jumped in to help out?”
2. “What types of people have you found to be your most successful franchisees?”
3. “What are some of the reasons you’ve turned down prospective franchise owners in the past?”
4. “Can you tell me something that I would have no way of knowing unless I was already a franchisee?”
5. “What makes your executive team stand out?
6. “What are the executives and other headquarters personnel really, really good at?”
7. “If I was a relative of yours, what would you tell me about this opportunity?”
8. “Again, if I was your relative, what would you tell me to watch out for as a franchisee?”
Do you see what I mean? (I’ve included even more great questions to ask franchise reps in my course)
Franchise representatives (salespeople) can’t answer questions like the ones I just shared, with a simple yes or no answer.
Again, don’t be shy. You may be about to invest $150,000, $250,000, or more into a franchise business opportunity.
Research Tip #3: Your approach; how you come across to franchisees and franchise representatives is really important.
You need to come across professional…businesslike, for sure. But, try to add some humor, too. Be human.
Ask About Lawsuits
I’m sorry. But, I have to bring up the topic of lawsuits.
From an article I wrote:
“Franchise lawsuits happen for a variety of reasons. Don’t get yourself into a tizzy just because I brought this topic up as one (an important one) to investigate as part of your franchise research. Just know that franchisors occasionally get sued by franchisees, vendors, suppliers…and franchisees occasionally get sued by vendors and by franchisors. Lawsuits are part of any type of business. As a matter of fact, lots of independent businesses are involved in litigation, too.” Read the rest.
Seriously. Lawsuits happen. The trick is to find out who’s suing who-and why. If there are a lot of lawsuits, you need to find out why.
Before you sign a franchise contract.
One of the best things about franchising is that most lawsuits are disclosed. So, it’s perfectly okay to ask franchise reps and even franchisees about any lawsuits disclosed on the Franchise Disclosure Documents* you receive from the franchisor.
* The Franchise Disclosure Document (FDD) is required reading. It’s also a document that must be sent to you electronically or via regular mail well before you buy a franchise. I go over what’s in it-and what you need to know about the FDD in my course.
The importance of doing powerful franchise research cannot be understated.
If you do your research correctly, you’ll be able to easily ascertain whether or not the franchise opportunities you’re investigating are good ones or not.
And if they’re money-making opportunities.