So you are considering franchise ownership… you may have looked at a few brands, and you may have even narrowed down your search to one or two. But how do you achieve complete confidence in a franchise? How do you know that a certain brand is right for YOU?
That’s where “Validation Calls” come in. These calls are an important step in the franchise Discovery Process, and they help you ensure that you are 100% confident in the franchise you are considering. How? By giving you an opportunity to speak to existing owners of a brand.
In this article, we are going to break down Validation Calls even further to talk about four key topics that will help you focus these calls and maximize what you get out of them.
Validation Call Basics
Wait a second… What are these “Validation Calls” we are talking about? Let’s back up for a second. Before we share our top tips, we will cover some quick basics about franchise Validation Calls to make sure we are all on the same page.
What Are Validation Calls?
As you look into franchise ownership, you will likely consider a few different brands and learn more about the unique offerings behind each one. But still, diving headfirst into a new career or investment opportunity can be scary. That is where Validation Calls come into play.
A Validation Call is when you have an opportunity to speak with existing owners of the franchise that you are talking to. Ideally, you will talk to a few different owners who will share information about what you can expect as an owner, all of the different support mechanisms the franchise has in place to help you out, and more.
When you do Validation Calls right, you will be able to talk to a cross-section of owners and learn a broad swath of information that (hopefully) supports what you have been hearing directly from the franchisor – when a brand is the right fit, speaking to these owners will only make you feel more confident in that system.
Which Owners Should You Talk To?
Now, technically, you have the right to talk to every single franchise owner in the system. You have their contact information. It is all in the Franchise Disclosure Document (FDD) that you will have already received by the time you are conducting Validation Calls. But let’s be honest… that is a little bit crazy and a LOT time consuming.
Instead, we recommend starting with a goal of speaking to three or four owners who will cover a range of topics. Why? Put simply, not every owner is going to be great at talking about every topic.
One owner may be fantastic about everything financial, telling you amounts down to the penny off the top of their head. The next person may have no clue about that. But they may be better talking about marketing, operations, sales, or staffing – whatever else is their focus.
Maybe you also want to talk to somebody a little bit newer and somebody who has been in the business a bit longer. Or maybe you want to get a cross-section of geographical locations.
Let’s say you are considering a landscape franchise, for instance. You probably do not want to talk to everybody in the South. Talk to somebody in the North, too. Find out how seasonality plays into the business.
Those are the basics of Validation Calls – but there are really four buckets of questions that we want people to make sure to ask and use to focus these calls. Focusing on these four areas is a great way to streamline your Validation Calls and ensure you are making the most of this opportunity.
The Four Buckets of Validation Calls
Let’s dive into the four general topics that make a strong Validation Call. Even if you think you have about one million questions, they can typically be lumped into four general buckets of what we hope to find out.
#1: A Day in the Life of a Franchise Owner
The number one thing we are trying to find out goes back to The Get Out of Bed Test. You want to understand what your day-to-day life as an owner of Franchise X is going to look like. What are you really going to do each morning when you get out of bed?
Remember, in order to paint an accurate picture, you will want to talk to three or four different owners. For example…
You want to be full-time, but you might talk to one semi-absentee owner. Sure, they hired someone else to run the day-to-day operations, but you can still ask what they looked for in the person they were hiring – that manager will be doing many of the things you would do as a full-time owner. Does that job description align with what you want to do as an owner?
You might also talk to an owner who is a little bit more of a “doer.” Maybe you have an owner who really enjoys painting and spends a bit more time in the field.
On the flip side, you might talk to someone who is more operations-oriented.
A fourth person is a great networker and connector and spends a lot of time building relationships out in the community.
These owners will have some variety in their day-to-day experiences, but when you get a good cross-section of owners, you are going to start to notice some consistencies throughout their experiences. Hopefully, these conversations validate what you have already heard and confirm that this brand can offer you a day-to-day life aligned with what you are looking for.
#2: Support From the Franchisor (and Other Owners)
Every franchise will tell you they are going to support you. They are going to have support in training, onboarding, marketing, operations, software and the technology – you name it.
Now, you get the chance to talk to an owner about the support. Has it met their expectations?
One thing to note is that we always tell people to be careful how they phrase this question. What if you ask, “Have you gotten a lot of support from the franchisor?”... and the owner says they have not? Does that invalidate what you have heard from the brand?
Maybe! But maybe that owner is someone who does not need or want much support. They participated in the franchisor’s training program and have been mostly doing things on their own since then. So have they gotten a lot of support? No. Did they need it or want it? Also no.
A better way to ask this question is, “Has the franchisor support met your expectations when you needed it?” That way, you can get a more well-rounded answer about what the support from the franchisor looks like when an owner does tap into it: If you call the franchisor… Does it take four days to hear back? Do you know who to call? Do you have one person to reach out to or teams of people to call?
The other piece of the “support” topic is all about other owners. As a franchise owner, if you run into a tricky situation, who knows the business better than another owner? During your Validation Calls, it can be a good idea to ask how the relationships are between owners of the brand. Can you call other owners? Do all of the owners talk to each other? Is there any structure within the franchise system that fosters that type of communication and collaboration?
#3: Would You Do It All Over Again?
This is one of our favorite questions to ask during a Validation Call… Based on what you know now, would you do this all over again? Why or why not?
Most of the time, they are going to say, “Yes, I would, but I would do X differently…”
That’s your cue to pay attention! The owner is about to share something that they personally struggled with and probably did wrong at the beginning. In almost every case, what they are really doing is ratting themselves out. They are telling you one part or a couple parts of the plan that the franchise laid out that they just either ignored or forgot.
Asking if an owner would do it all over again is great validation for everything that you have heard so far. Basically, the takeaways here are to follow the plan and put forth the effort.
Most of the time, even when there have been struggles, the owner has gotten through it. They are happy they invested in franchise ownership and took control of their life.
#4: Financial Questions
The fourth bucket of Validation Call topics encompasses the financial questions… in other words, “Uhh… How much money do you make?”
So how do we handle the financial questions around franchise ownership? Again, we want to be smart in how we ask these questions. Let me give an example of a not-so-smart way to ask about finances: “Hey, do you make any money doing this?”
Yes, we want to know that. But there are a lot of different factors to consider – and it is important to remember that owners compensate themselves very differently. (This is related to what we call the “Net Profit Fallacy.”)
Maybe you are talking to an owner who has been in business for three years. Maybe that person does not pay themselves anything or compensates themselves very little from the business because they have a spouse who is making enough money to pay all of the bills at home. The business is taking that money to continue to reinvest and grow.
You might talk to another owner who pays themselves every single extra dime every single month, leaving nothing left in the business. Maybe they are running other expenses through the business – cell phones, cars, personal expenses, etc. As an owner, it is absolutely your right to do that, but that bottom line is going to look a lot different than the bottom line on the previous owner’s balance sheets.
This is all to say that a question like “How much money do you make?” is not going to really tell us that much. Instead, we have to ask smart questions to get a better handle on the business’ costs and profits.
One way to do this is to break down the questions – instead of asking how much it costs to run the business every month, ask about the breakdown of the expenses…
Do you need some sort of a location?
Do you have vehicles?
Do you have equipment you need to pay for?
Do you have staff? How much do you pay them?
How much do you spend on marketing?
And then, let’s ask about the revenue…
How do you make money?
What is the average ticket size?
How many customers do you average each month?
Asking smarter, more detailed questions is a much better way to truly understand the costs and fees. You will be able to get a clearer picture of what you will need to do to break even – and better yet, what you will need to do to achieve your financial goals beyond that.
Remember, there is some financial information in the FDD, but it can be a little bit incomplete. That is why we seize the opportunity of Validation Calls to ask intelligent, pointed questions that get us the answers we need.
Why Do the “Four Buckets” Matter?
When you have Validation Calls, there will be tons of questions you want to ask – but if we can keep it in those four buckets, it keeps the calls simple. Sticking to the four buckets keeps you on target and allows you to get the most out of each call and out of each owner.
If you encounter an owner who cannot rattle off that financial stuff, that is fine. Then you ask about the support systems. You ask about a day in the life of an owner. Ask them to talk about some of the struggles they faced at the beginning – would they do this again?
By talking to a few different owners and gaining a good cross section of information, you really can have a high level of peace of mind. That is why Validation Calls are such an amazing part of this. It is also why they are done typically toward the end: At the beginning of the Discovery Process, you do not have enough information to ask smart questions.
Validation Calls are just one of the many areas that our team at FranCoach can help you with as you look into franchise ownership. Our expert team of coaches will support you and ensure you get everything you need out of this important step in the process.
Who Are We Anyway?
Are you ready to pursue franchise ownership for yourself? Let’s connect. FranCoach is a national search firm dedicated to working with individuals who are interested in owning a franchise. We've partnered with over 600 of the top franchisors in the country, spanning nearly 70 industries.
Our number one goal with our clients is to help them find the absolute best franchise for them to own. Our goal with our Franchising 101 podcast series and this series of informational articles is to help educate people on all aspects of franchise ownership.
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