Current and Former Franchisees - This section has very important information about current and former franchisees. Many franchisees in your area may mean more competition for customers. The number of terminated, cancelled, or non-renewed franchises may indicate problems.
Some companies may repurchase failed outlets and list them as company-owned outlets.
Look for contact information for current franchisees and franchisees who have left the system within the last year; talking to them may be the most reliable way for you to verify the franchisor’s claims. Visit or phone as many of the current and former franchisees as possible to chat about their experiences, and the volume and type of business they’re doing. Note that some of them may have signed confidentiality agreements that prevent them from speaking with you. If that’s the case, try contacting others on the list.
If you buy an existing outlet that was reacquired by the franchisor, the franchisor must tell you who owned and operated the outlet for the last five years. Several owners in a short time may indicate that the location isn’t profitable or that the franchisor hasn’t supported that outlet as promised. Consider contacting several previous owners to learn more about their experience operating the particular outlet. You will want to learn:
- how long the franchisee operated the franchise
- where the franchise was located
- whether they were able to open the outlet in a reasonable time
- their total investment, including any hidden or unexpected costs
- how long it took them to cover operating costs and earn a reasonable income
- whether they were satisfied with the cost, delivery, and quality of the goods or services they sold
- their backgrounds before becoming a franchisee
If you have doubts about whether the training offered is sufficient to give you the tools you need to handle day-to-day business operations, consider another franchise opportunity.
- whether the franchisor’s training was adequate
- whether the franchisor provided ongoing help
- their satisfaction with the franchisor’s advertising program
- whether the franchisor fulfilled its contractual obligations
- whether the franchisee would invest in another outlet
- whether the franchisee would recommend the investment