Behind the Numbers

You Can Question Existing Franchisees, But Will You Know If They Don’t Tell You The Truth? Sometimes Even Positive Remarks Are False!

June 22nd, 2010

By John P. Hayes, Ph.D.

When you’re buying a franchise, numerous people (usually including the person who’s trying to sell you the franchise) will advise you to call existing franchisees and ask them a set of questions before you make your investment decision.

Is that a good idea?

It depends!

Who’s telling you the truth?

It’s a good idea if you’re absolutely certain that the existing franchisees answered your questions truthfully. But in most instances you won’t be certain. And in many instances the answers you got can be categorized as false negatives or false positives. Meaning you didn’t get truthful answers.

Here’s why:

“Franchisees will give a prospect a false positive if they think the corporate office is checking up on them,” explains Jeff Johnson, founder and CEO of the Franchise Research Institute. “They won’t tell the truth for fear that they’ll be penalized.”

Glowing, but false

To avoid the downside of telling the truth, existing franchisees will give their franchisor a glowing report.

But at other times they’ll lie even though they like the franchise and are profiting from it, continues Johnson. “Franchisees may answer questions with a false negative if they want to discourage more franchisees from joining the network. If the existing franchisee thinks the prospect might open a unit in his territory, he’ll deliver false negatives about the franchise company.”

Either way, the prospect doesn’t have a clue about what’s really going on at that franchise company! (Sadly, neither does the franchisor, though some franchisors know what’s going on and they want to hide it).

Getting to the real truth

How can a prospective franchisee avoid false negatives and false positives when talking to existing franchisees?

Rely on a third-party evaluation of the franchise company. There are several in the marketplace, but not all measure up. The Franchise Research Institute has issued 21 reports that designate world-class franchise companies. Use these reports to avoid getting the wrong impression, good or bad, about a franchise company.

. . . John P. Hayes, Ph.D. is a 30-year franchise veteran. He writes several blogs, including HowToBuyAFranchise.com and FranchiseMastermind.com.

Tags: Best Franchises, Buying A Franchise, Franchise Due Diligence, FranSurvey, Researched Franchises, Top Franchises, World-Class Franchise
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