How often and how much should you invest in franchise validation?

Since when did "Franchise validation is not only a legal requirement" become a standard requirement??? In fact most "Franchise validation" efforts are a few casual calls by prospective franchisees to current franchisees that do not yield much in the way of reliable information to base a franchise investment on or worse to shill franchisees that the franchisor has set up for the prospective franchisee to hear rosy projections from.??

AI wrote this article - and I don't know where they found that franchise validation is "a legal requirement". No one makes a franchisee validate the franchise. It is however, recommended to talk with current and former franchisees to learn about their experiences and satisfaction or dissatisfaction with the franchisor. Since each franchise is different, the perspectives of franchisees vary from one to another. Potential franchisees should keep an open mind when talking with current franchisees since so much depends upon the location, the operations, and management of each individual business.

Agree and perhaps the best way to validate is to talk to existing franchisees. No one knows better than those who live it daily. Also don’t get succeeded into averages

Franchisee feedback is important, but remember they’re not always accurate or complete. You might talk to one or two with bad experiences or with viewpoints that don’t align with the franchisor, but that may not be representative of the entire system’s experience. Don’t let a “bad apple” spoil your own research and gut instinct!

The FDD provides an incredible amount of valuable information - there is a reason why a prospective franchisee gets 14 days with it. As noted, talking to franchisees is easy as the FDD lists all of them with contact info! Pay special attention to all the extra fees, ensuring they are detailed in Item 11 of the FDD - for example, technology and marketing fees. Read Item 11 carefully to understand the level of support provided. Also, scrub the franchisor's website to get a flavor for the culture.

Validation with franchisees should not be started until after you have talked with the franchisor and are seriously considering the franchise. Franchisee validation takes time. The franchisor may have a set way to introduce you to franchisees. Another suggestion is to talk with franchisees that are operating in similar demographic locations as yours. Comparing apples to apples is better than apples to oranges. You can ask the franchisor to suggest franchisees to interview that operate with in similar demographic areas. Picking franchisees out of a long list is not always beneficial. Ask to talk with top-tier franchisees and ask them what they are doing to be so successful. Then make an effort to emulate their success.

It’s important to note that FDD item 19 details could be a broad and even vague financial representation of the brand. I.E - “of the X number of franchise units the highest gross revenue producer is $xxx.xxx, the lowest gross revenue producer is $xxx,xx per year. It is up to the potential franchisee to complete a reverse P&L to estimate cost to operate, speaking to other operating franchisees is the best possible provider of those financial projections. The Franchisor should provide (as required in the FDD) a complete and accurate list of franchisee ownership and ctc info. A complete list of questions before making those validation calls is imperative. I would also suggest reviewing FDD with a FRANCHISE atty- not your regular atty.

It is tough to put a price tag on validation since it may be your life savings that you are considering for the investment. Rather than focus on the dollar amount, think about the time you want to take by calling franchisees and visiting establishments (if brick/mortar franchise). The time is more important than the actual dollar cost.

Your own , shoe leather may not seem to have a cost but is one of the most effective. Go visit as many outlets as you possibly can. Send other people in as mystery shoppers. See if you can detect what their training levels are. See what the cleanliness is. Only then do you have a system report card that you can ask better questions of the franchisor

When it comes to validating whether or not the franchise opportunity you're thinking about buying is an excellent one, with profitable, happy franchisees, you need to continuously assess what you're hearing from the franchisees and from franchise headquarters. When things come up that require a bit more clarity, don't be shy. Ask your franchise representative questions about any concerns or uncertainties you may have. Remember; this is your money. Make a commitment right now to get the answers you need to make a smart decision on a franchise to own.