Potential franchise owners can gain valuable insights from the franchisee validation process. The franchise investigation process allows prospective franchise owners to vet a franchise to determine if it is a good investment. This investigative process usually has three steps: foundational calls, franchisee validation, and discovery day.  

During the franchisee validation portion, the prospective franchise owner can speak with franchisees in the franchise system, giving the candidate a greater understanding of what a franchise is like. It is always suggested to encourage a candidate to speak or meet with a franchisee for validation. Email communication is not recommended. 

Sometimes candidates will want to speak with franchisees before attending a Discovery Day – depending on how many franchisees you have at the time of a candidate entering this stage in the process – you might be comfortable with a candidate performing validation before a Discovery Day, or you might let the candidate know that after attending a Discovery Day that they will be permitted to start reaching out to franchisees for validation. When this step is within a client’s journey is up to you, based on the candidate meeting your qualifications and financial requirements.  

Regardless of when validation is started, you are NOT allowed to designate or assign which franchisees a candidate can call. A candidate is legally allowed to contact any or all of your franchisees. However, depending on the number of franchisees and any possible commonalities that the candidate and a franchisee might have, you can suggest that a candidate focus on contacting a particular franchisee based on time in the system, location, background, etc.  

Upon reaching this step, we suggest reaching out to the franchisees to prepare them for incoming validation calls – letting them know who the candidate is, where they might be hoping to locate, any fun background details about them to help strike up conversation and to let them know that they can ask questions back to help get to know the candidate. You should request that any franchisees that get a validation call or a visit, after to provide you with feedback about their “visit” with the candidate. This will provide you with excellent feedback to be able to learn more about your personal performance and about the franchise as a whole. You should use this incoming data to help strengthen any loose ends that are uncovered. 

Things to Remember about Validation:

  • Validation is designed for the prospective franchisee to discover: 1) franchisees not doing their job 2) if the franchisor is not doing their job 3) circumstances beyond the franchise’s control and how the franchisor reacted. 
  • The candidates get to choose who they call or VISIT (encourage visits) – you CANNOT restrict them on whom they may call. 
  • You can suggest a short list of questions for the candidate to ask the franchisees (See Best Practice below for question suggestions) 
  • Explain and request that calls are to be kept to no longer than 15 minutes and visits shorter than 30 minutes – the franchisees have their businesses to run and their time is valuable. 
  • Follow up with the candidate after their calls to address any questions or concerns 
  • You should also let the franchisees know that email should only be used for the means of scheduling, not to have validation discussions through written emails. 
  • Don’t have franchisees yet, so what do you do for validation? Rest assured, there is not much you can do until you have franchisees. However, if you have a designated salesperson and at this stage in the process the candidate has not yet spoken to your founder, CEO or a leader on executive team, scheduling a video call with the founder could serve as an opportunity to still show transparency and grant the candidate the chance to meet with the leadership team before traveling for a Discovery Day.  

Best Practices

Here are some suggested questions to ask that a candidate can ask a franchisee during the franchisee validation process. You can share some of these suggested questions with a candidate to help get and keep the validation calls moving along. Some questions can be asked to one franchisee and others can be asked to a second or third franchisee to be able to best balance their time and responses.  

It is frequent that if a candidate is working with a broker/consultant that these details and validation etiquette will be covered with them, but it’s good to have personalized validation questions to suggest to a candidate to help them learn more about your franchise concept. 

These questions are suggestion only. Some are created for concepts that require a physical location. Franchisors should only suggest a few questions to candidates: be sure to personalize the questions based on your concept, industry, model, number of franchisees, etc.  

Validation Questions: Franchisee Background

  • What type of work did you do before you got into your own business? 
  • Do you have any previous business ownership experience? 
  • Why did you leave that job to go into your own business? 
  • When did you open your business? 
  • Why did you choose this franchise? 

Validation Questions: Initial Training & Opening Support

  • Did your initial training adequately prepare you for opening your business? 
  • During your first year in business, did the franchise company provide adequate support? Can you give an example? 
  • What do you think is the biggest mistake that a first-year franchise owner can make? 
  • What would cause a franchisee to fail? 

Validation Questions: Ongoing Support

  • Has the franchise company continued to provide the level of ongoing support you expect and need? Can you give an example? 
  • After initial training, what additional training does the franchisor provide? Is it regularly scheduled or provided as needed? What additional training have you received? What difference has that made for you in operating the business? 
  • Is there enough or too much training? Is the franchise company flexible in giving more training to franchise owners who need/want it? 
  • Does the franchise company host franchisee annual meetings or teleconference calls?  

Validation Questions: Marketing Programs

  • How does the franchisor contribute to your marketing efforts? What are the results of those marketing efforts? 
  • What programs for lead generation has the franchise company introduced you to? Do you use those tactics? What are the results and costs of those tactics? Do you consider them worthwhile? What have you added locally to generate business? 
  • Do you have any strong competitors in your area? If so, who? What do you think are the major competitive advantages that set you apart? 

Validation Questions: Purchasing Power

  • Are you required to purchase from the franchisor, or may you purchase locally? 
  • Can you purchase items from vendors outside the franchise company? Do you consider that good or bad? Why? 
  • Does the franchisor use the collective buying power of the entire franchise to obtain discounts on supplies and/or inventory beyond what the individual franchisees could achieve? Can you give an example? 

Validation Questions: Franchisor / Franchisee Relationship

  • Is the franchise company supportive and caring about you and your operations? What makes you say that? 
  • Is the home office competent? Do they act with your interests in mind? Why do you say that?  
  • How is Corporate Culture?   

Validation Questions: Investment Details and Role of the Owner

  • Do you own multiple locations or territories? 
  • How did you determine the location/territory you have? 
  • What is the average amount of time required to open a location? 
  • Has staffing been difficult for you? 
  • How much investment did it take you to get your business up and running? Did that include some working capital? How much working capital did you budget? How long a period was that intended for? 
  • Currently, what is your hourly commitment to your business per week? Has that amount of time changed since the first few months you were open? 
  • Is your role in the business what you wanted/expected it to be? If not, how is it different? 

Validation Questions: Earnings

  • What were your expectations for annual revenue? How long did it take you to realize those expectations? 
  • How long were you in business before you reached breakeven? 
  • What was your annual net profit, as a number or percentage of sales last year? (If open for several years: was that fairly consistent with prior years? If not, greater or less?) 
  • What has the greatest effect on your annual net profit? 
  • What will you do differently in your business this year? Why have you decided that? 
  • What separates higher performers from lower performers in your franchise system? Why do you say that? 

Validation Questions: Conclusion

  • What was the biggest challenge you experienced in your first year? 
  • Were there any pleasant surprises in opening this franchise business? 
  • Do you have any regrets? 
  • Are you aware of any unhappy franchisees? 
  • If you had it to do over, would you decide to get into this business again? Why or why not? 

Please email fieldguide@spadealaw.com if you have any suggestions, comments, correction or additions for the Field Guide. The purpose of the Field Guide is to create an organic, ever expanding resource of best practices for franchisors and your feedback and input is always welcome.