Performance Questions To Ask Other Franchisees During Due Diligence

15.08.22 09:37 PM By Stacey Riska

We are continuing on our journey together, sharing with you the questions to ask franchisees during the due diligence phase. Now, these are not all the questions that you can ask, these are just some really important questions we believe that you should not skip. Today we're covering performance questions and we'll probably talk about the Item 19 here.

What do you think would cause a franchisee to fail?

In our franchise concept what would cause a franchisee to fail, I always loop it back to marketing. I would also say that, and this is not an answer that you're going to probably hear in other franchise concepts, but in our franchise concept, weather and seasonality would be a big business factor. If we're going out and doing events where you're setting up a Tiki bar outside, well, rain and snow and those kinds of things, so understanding the seasonality of the business think is important. But for many other franchise concepts, this can play in as well. We place a lot of candidates in home-service concepts. Some of those like pest control can be very seasonal in nature, even things like plumbing and electrical, they actually have a seasonality to them. So understanding those dynamics I think is very important.

That's a really good point. I'll add to that by saying that this is a question where when you look at different franchises, you're going to get a lot of different answers depending on the length of time that that franchise has been around, number one, and number two, the type of franchise that you're looking at. Marketing can definitely play into this as well. Absolutely. If we didn't do marketing, we would've never made our business successful. Other franchises that are more established, may have marketing programs where you don't have to spend a lot of time on marketing and that's not why you're going to fail. Maybe you're going to fail because you're not doing the work properly and you're getting bad reviews all over the place. So it's going to be very different across the different types of businesses. Do not skip this question. 

Question number two, and I love this one. 

What's the biggest mistake new franchisees could make?

That is definitely a question to be asked in our franchise concept. I would say the key is understanding the dynamics of what it's going to take to create that name recognition. So when we bought our franchise, we were so excited and passionate about it because we knew it had an amazing product. And actually, everybody that tasted it said the same thing, this is so amazing. So you get into this mindset, well, how could I not be successful? Everybody's going to want it. They're going to come banging down our door and that really wasn't quite the case. 
Dave talked about this in a previous episode, you have to understand the competition. We had big name, big brand, and big money competition. So we kind of almost had to take a different kind of a strategy, and a different kind of marketing to be able to position ourselves. Now, granted there was a big enough marketplace for us to be a competitor in our marketplace, but what would cause a franchisee to fail is really just not understanding what they're getting into. How long it's going to take for you to be successful? How are you going to be successful? And how are you going to adapt when stuff hits the fan? Because it will. 

I'm going to circle back to this question. The question is what's the biggest mistake new franchisees could make and you're talking about them failing. I mean, that's probably the short version, right?  They're going to fail if they make this mistake; I think the biggest mistake franchisees could make is not spending enough money on marketing and the type of marketing that you do. I don't want to go in-depth here. If you really want to learn more about what we went through, watch our episodes on “Would we do it over again”? The biggest mistake in our franchise is not marketing, and in many other franchises that you could get into this is the same thing. What you will see is you're going to get a lot of different answers depending on how established that franchise is as a franchise, and the type of business that they're in, you're going to get a lot of different answers. 

Now the final question.

What's the most important thing a new franchise can do to be successful? 

So this is the flip side. We were talking about failure, what can they do to fail?  Now, what can they do to be successful?

In our franchise? I would say the most important thing you can do to be successful is actually follow the system.

That's a great answer, I can't disagree. Looping back around, particularly with the event model, they really knew what they were doing and they really had a good system. And I believe that we followed it. We followed it very much to the “T”. We got derailed when they went off course and started getting into other areas, like going from an event model to brick and mortar. They really didn't have enough resources to be able to manage and provide the right kind of support for those additional business models.

Every franchise concept that you look at is going to have pros and cons, but the most important thing is to understand is are the franchisees following the system. If you're talking to a franchisee who for some reason or another has bad things to say about the franchise concept, understand why and if they are following the system. A lot of times people will get into franchising and they just want to think they can do it better or they know more, or they just want to know why is the franchise doing it this way with their rules? I want to do it that way. And that's where they start getting into trouble and they start underperforming and they want to blame the franchise when it's really, they're not following the system. You're buying into a system for a reason. 

I don't think any more needs to be said there. Absolutely,  you're buying a system, follow the system. We're done for today.

If you'd like a copy of the full questionnaire: questions to ask franchisees please just click on this link and ask us to send you a copy.

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 Author Bio

I’m Stacey Riska aka “Small Business Stacey”, your franchise placement specialist. I help aspiring business owners find the PERFECT franchise so they can get to the next level in life and business.
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