Sample questions for franchisee

Validation Questions

Almost all of your validation questions should be a variation or expansion of the following 3 questions:

  1. Would you do it again?
  2. How much money are you making?
  3. How good is the franchisor’s support and training?
  1. Would you do it again?
  • Are you happy with your decision to invest in this franchise?
  • Why did you decide to go into franchising?
  • Why did you choose this franchise?
  • What other concepts did you look at?
  • Do you have any regrets that you did not choose to invest in one of these alternative concepts?
  • What do you wish you knew before you signed the franchise agreement?
  • If you could do it all over again, would you decide to invest in this franchise?
  • Why/why not?
  1. How much money are you making?
  • Are you making the kind of money you expected to be making? More? Less? By how much?
  • How long were you in business before you reached your break-even point?
  • How long was it before you slept through the night?
  • What are your annual sales?
  • How long did it take you to reach that point?
  • What is your annual net profit?
  • How long did it take to get there?
  • Has that number been consistent?
  • Are your sales seasonal or have they in any way been affected by forces outside of your control?
  • What are the drivers for your net profit?
  • What’s the biggest source of your margin pressure?
  • What were your initial working capital needs?
  • Were they consistent with your business plan estimates?
  • Were you compelled to obtain additional capital (i.e., beyond the capital provided for in your business plan)?
  • Were the initial and on-going costs described in Items 5 – 7 of the FDD realistic?
  • In as much detail as you can provide, what are your expense line items?
  • What % of Gross Sales is represented by labor costs? Cost of goods sold?
  • Who/how many employees (including yourself) account your labor costs?
  • Do you have any significant competitors in your market?
  • What are the main competitive advantages that set this franchise apart?
  • What will you do differently in your business this year?
  • Why?
  • What in your judgment separates the high versus low performers in the this franchise?
  • How much of an impediment/benefit to your bottom line are this franchise’s product/supplier restrictions?
  1. How good is the franchisor’s support and training?
  • Are the HQ people capable and competent?
  • Are you assigned a regular contact?
  • How responsive are they?
  • Did your initial training prepare you for opening your business?
  • How good was their support with your store’s Grand Opening?
  • How many franchisor representatives were present at the Grand Opening? Were they value-added?
  • During your 1st year in business, did the franchsior support your business activities and results to your expectations or needs?
  • Can you give an example?
  • What do you think is the biggest mistake a new franchisee with this franchise system can make?
  • How effective was your initial training?
  • Tell me about on-going training (after the initial training is complete).
  • Is it regularly scheduled, driven by changes in the business, haphazard, etc.?
  • How does the franchisor support your marketing efforts?
  • Do you see/hear ads on the Internet or, in your market, TV, radio etc.?
  • Does the franchisor’s national ad campaign support or overlook your market?
  • What kind or support did the franchisor give you for site selection?
  • Did you think they steered you into a less than ideal location?
  • Did they simply give you site selection criteria and let you have at it?
  • Did they turn you down for a site you determined would be ideal?
  • Did they enlist the support of any local RE professionals?
  • How much did you feel as if you were on your own?

Generally, you should supplement your franchisee validation by contacting a “trademark-specific” franchisee association, even if none was listed in the franchisor’s FDD Item 20. The absence of Item 20 disclosure doesn’t mean they don’t exist because there are some steps an association needs to take in order to be listed.

Finally, try to make your validation calls a conversation rather than an interview. A simple, staccato series of questions may disengage a current or former franchisee and cut the validation session short. Many franchisees are excited to tell you about their experience – although some are decidedly not – so the best approach may be to just sit back and listen. But be sure that all points are covered.