I am blogging a series of posts on the Secret Sauce of Franchise Investing based upon an excellent article I read some time ago on what private equity likes to see before investing in a franchise. In this post I am highlighting the seventh ingredient which is whether the franchise has successful franchisees.
Good franchisors want franchisees to be successful and happy. But let me tell you from experience in practicing franchising law for over 20 years, not all franchisors are created equal. There are numerous franchisors with unhappy and struggling franchisees. Do not make the mistake in investing in such a franchise. Do your due diligence and interview franchisees before you invest your hard earned savings. If franchisees tell you the franchisor does not support them, or if franchisees wouldn’t do it all over again, rule out that franchisor. Because things are not likely to be different for you.
Franchisors need to do everything they can to make sure franchisees are successful. Much like having raving customers, franchisors need raving franchisees. Often it is a good sign when a franchise has many multi-unit franchisees. This suggests that franchisees were happy and impressed enough with their investment that they wanted to open additional locations. A franchise system with successful and happy franchisees is much more likely to be primed for growth and an ability to attract other franchisees to the system.
Always check online to see if you find numerous complaints about a franchise online in Google searches or on websites such as Unhappy Franchisee. If you see lots of complaints or indications of frequent litigation, you should strongly consider investing your savings in a different option.