Shopping for a Franchise: Conducting Your Due Diligence Part #1 — Qualitative Research
For many people, buying a franchise is the best way to fulfill their dream of owning a business. After all, starting a business from “scratch” can be a daunting proposition. And purchasing an independent is perhaps best left to someone with extensive experience in that particular field.
But acquiring a franchise is not without risk. With thousands of options from which to choose, there are many ways to go wrong. The solution? Conducting your due diligence.
A thorough appraisal of a business, it’s a step you won’t want to skip. You’ll establish assets, liabilities, rights and regulations. Along the way, you’ll also evaluate your potential for a “good fit.”
Two complementary strategies to pursue
When conducting their due diligence, many choose to divide their research efforts into two approaches. Supportive of each other, both are important in evaluating your franchise opportunity:
- Qualitative research — which we’ll address here — gathers information from which you’ll form an opinion. Think of it as acquiring impressions, experiences, and views.
- Quantitative data — which we cover in our Due Diligence Part #2 — collects the facts and figures you’ll also need to assess an opportunity. Think numbers, percentages, contractual terms and the like.
Addressing qualitative due diligence
In meetings with franchise network executives or from information posted on their website or published in their promotional materials, you’ll want to determine:
- When was the franchisor established?
- How strong is the franchise brand?
- How does the franchise stand out from competitors?
- What kind of training and support programs does the franchisor offer?
- What is the industry outlook for this business and the products or services it offers?
Any reputable franchise network will make available current franchisees for you to interview. Don’t overlook this opportunity to learn first-hand from the experiences of others:
- Were you satisfied with the initial training?
- What ongoing support is available for franchisees?
- How responsive is the franchisor to your questions or requests?
- What was your experience regarding achieving break-even?
- What are the greatest satisfactions of working in this business? Frustrations?
- Describe any major hurdles you had to overcome in order to become successful?
- In regard to franchisor programs, what worked? What didn’t?
- Would you purchase your franchise again?
Use these questions as a start. In teamwork with your accountant, attorney, and/or other trusted advisors, it’s likely you’ll develop many more.
A parting word: Image360 welcomes any and all questions from those seeking to learn more about us.