Franchise Investigation: A Buyer’s Best Protection
Question From A Visitor
You write that most franchise buyers don’t conduct due diligence. Or if they do, they don’t do a good enough job of investigating what they’re buying. Why?
Our Findings On Buyers And Franchise Investigation
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. People don’t like being intimidated. They also don’t want to show it. So, they may act more in control than they are.
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 sales process not only creates excitement, but often a blind eye to the reality of needing real investigation. The desire to buy a franchise and also investigating it should go hand in hand, but it’s not the case. Buyers are not only unequipped to conduct a real due diligence, they can find it easier to trust the sales process and substitute that for analysis. And please understand, there’s a big difference between cursory due diligence and a full franchise investigation.
The Truth About Franchise Buyer Mentality
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 easily trumps legitimate due diligence. That’s why such a small percentage of buyers choose to investigate 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. Buyers must understand that buying a franchise is risky business.
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.