Franchise Investigation Is The BEST Guard Against Failure

Franchise Investigation

Proper Franchise Investigation Is Essential

Question From A Visitor

You say that most franchise buyers don’t conduct due diligence. Why?

Our Response

Intellectually, one would assume that franchise buyers would want to fully research an opportunity before making a purchase. But the truth is, most prospective franchisees are operating in unknown territory. And because buyers are in unknown territory, the buying process is intimidating. 

In addition, franchise salespeople, whether directly employed by the franchisor, or franchise brokers acting independently, have a very powerful hold on buyers in terms of experience and knowledge. The desire to buy a franchise and the excitement that can be created during the sales process can blind buyers to the need for investigation and unfortunately, that is often the case. The desire to buy a franchise and also investigating it should go hand in hand, but new buyers are usually neither equipped nor motivated to conduct real due diligence. And please understand, there’s a big difference between cursory due diligence and a full franchise investigation. 

The sad truth is that buyers most often purchase on emotion, not facts. A combination of salesmanship and naivety often substitutes for reality. Bottom line, the dream of owning a given franchise generally trumps legitimate due diligence. That’s why such a small percentage of buyers choose to do it or have it done for them. We’ve conducted many best practice surveys and have found cases where nine out of 10 franchisees never truly investigated or fully understood what they were buying until after the purchase and they were operating the business. Buyers must understand that buying a franchise is risky business. Research is essential. 

Real Franchise Investigation

Human nature often takes the path of least resistance. And in that mode, the mind can disregard the need for realistic thinking. Certainly, when it comes to buying a franchise reality is overlooked. We created The Focus Program for Emerging Entrepreneurs to help prospective business owners make better decisions and understanding how to conduct a franchise investigation is part of the Focus Program.