To validate a franchise, you talk to the people who already own one. Use Item 20 of the Franchise Disclosure Document to find current and former owners, talk to at least five before you say yes, and ask the questions a sales presentation won’t answer.
Validation is where you stop reading about a business and start hearing about it. It’s also where a lot of candidates realize the owners doing well are people a lot like them.
What validation is, and what it isn’t
Validation is your chance to compare what the franchisor told you with what owners actually live every day. It isn’t about catching anyone in a lie. It’s about filling in what a presentation can’t cover: what the first year really feels like, the parts of the job nobody mentions, and whether the daily work matches the life you’re trying to build.
When to make the calls
Make your calls after you’ve narrowed your list to franchises that genuinely fit and you have the FDD in hand, and before you sign anything or pay anything.
You have to receive the FDD at least 14 calendar days before you can sign a binding agreement or pay the franchisor. Use that time. Read it, sit with it, and start making your calls.
Who to call
Item 20 of the FDD is your call list. It shows three years of history for the franchise system, including how many locations opened, closed, and changed hands. It gives you contact information for current owners. In a large system, the franchisor can limit that list to your state and nearby states, as long as it reaches at least 100 locations. If you want to talk to someone farther away, ask for more names. Item 20 also lists former owners who left the system during the franchisor’s last fiscal year.
Use it to choose your own calls, not just the names you’re handed.
Know this before you start dialing. A franchisor cannot make any franchisee talk to you. Every one of those conversations is voluntary. The top performers are often the busiest people in the system, and some of them simply don’t have time for an hour with a stranger. Owners who are struggling frequently don’t want to say so out loud. So the list is a starting point, not a truth serum. You have to work it intelligently.
Match the conversation to the question you’re trying to answer. If you want to know what the first year feels like, talk to several people who are in it right now. If you want to know whether this is still a good business in year five, talk to people in year five. If you’d be running this alongside another job, or as a single owner with no partner, find people in that same situation.
Call a few former owners, too. Their reasons for leaving can tell you a lot, whether or not those reasons had anything to do with the franchise.
One more detail worth knowing. Some owners may have signed confidentiality clauses that restrict what they can say to prospective franchisees about their experience. If that’s happened in the last three fiscal years, Item 20 has to tell you.
How many owners to talk to
My rule is at least three owners before you rule out a brand and at least five before you say yes. Somewhere in that range, the answers stop changing, and that’s when you actually know something.
What to ask
Get nosy. The uncomfortable questions are the ones worth asking:
- What’s the worst part of this for you?
- What’s the greatest opportunity you haven’t exploited?
- What surprised you most?
- What has been the hardest thing to get through for you?
- Have you done anything differently from the franchisor’s playbook? What made you decide to do that? Did that help or hurt you?
- What will you do differently next year and why?
- What would you do differently if you were starting over? Why?
- How was your 2nd year different than your first?
- How has the franchisor responded when you’ve requested or needed direction and support?
Listen for what owners volunteer, too. Sometimes the most useful thing you’ll hear is something you didn’t think to ask about.
Making sense of what you hear
Take notes. Don’t turn assumptions into conclusions. Turn them into questions, and then ask them.
One frustrated owner isn’t a verdict. Any system can have an owner going through a hard month or even a difficult year. What matters is the pattern across your calls, and the behaviors of response, problem solving, and action that lead to the outcomes people want.
The same goes for Item 20. A number that looks bad can have a perfectly good explanation behind it, so ask the franchisor for it. Turnover that the franchisor isn’t comfortable explaining is worth slowing down for.
After enough of these conversations, you’ll have a clear view of what the people at the top of this system are actually doing to get there. Then you ask yourself the only question that really matters: am I ready, willing, and able to do that? Either through me, or through someone I hire?
If the answer is yes, you may have found something. If it’s no, you should probably invest your time in a different direction, and that’s a good outcome too.
Where I fit
I walk candidates through this whole path, from the first conversation about what you actually want, through the research, the FDD, and the validation calls, until you reach a decision. Whichever decision that is. Once validation checks out, the next steps are lining up your financing and starting the franchise once you sign.
I’m an independent franchise consultant, and I work with candidates nationwide. I’m paid by the franchisor when a placement is made, and I’m paid the same regardless of your investment. Your net expense to work with me is zero. You never pay me a dime.
Where to start
Finding a franchise is easy. Finding the right one for you is not.
If you want to see which types of franchises fit your goals and the life you’re trying to build, take the quiz. It’s a few minutes, and it gets us to a real conversation faster than anything else.
Rather talk it through first? Reach out through the contact form and we’ll set up a free 15-minute consultation. I’ll talk to anybody anywhere about franchising.
Matt Stevens Independent Franchise Consultant, The Franchise Guy
Nearly 40 Years in Franchising | 4 Businesses Owned | Nearly 1,000 Franchisees Placed | heisthefranchiseguy.com
Matt Stevens has spent nearly 40 years in franchising. He’s helped more than 3,000 people explore franchise ownership and placed nearly 1,000 of them as franchisees across more than 40 states. He has owned four businesses and served as Vice President and Partner in a $2 billion international franchise holding company. He works as an independent franchise consultant based in Dublin, Ohio, and his consulting is free to the candidate. Learn more about Matt
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Frequently Asked Questions
Validating a franchise means talking directly with current and former owners in the system before you sign. You compare what the franchisor told you with what owners actually experience: the first year, the hardest parts of the job, how the franchisor supports them, and whether the daily work fits the life you want.
Item 20 of the Franchise Disclosure Document. It lists current owners, though a large system can limit that list to your state and nearby states as long as it reaches at least 100 locations. It also lists former owners who left during the franchisor’s last fiscal year, plus three years of openings, closings, and transfers. Pick your own calls, and ask for more names if you need them.
At least three before you rule out a brand, and at least five before you say yes. Somewhere in that range the answers stop changing and you actually know something. Match each call to your question: first-year owners for the first year, and year-five owners for year five.
The uncomfortable ones. What’s the worst part of this? What surprised you most? What was the hardest thing you had to get through? Have you done anything differently from the playbook, and did it help or hurt? What would you do differently if you started over? What did your second year cost you?
Yes. Item 20 lists owners who left the system during the franchisor’s last fiscal year. Their reasons for leaving can tell you a lot, whether or not the reasons had anything to do with the franchise. Look for patterns rather than judging on any single call.
Partly. A franchisor can’t make any owner talk to you, and every conversation is voluntary. But some owners may have signed confidentiality clauses that restrict what they can say to prospective franchisees about their experience. If that’s happened in the last three fiscal years, Item 20 of the FDD has to disclose it.
After you’ve narrowed your list and received the Franchise Disclosure Document, and before you sign or pay anything. You must receive the FDD at least 14 calendar days before signing a binding agreement or paying the franchisor, so use that window.
Not with me. I’m paid by the franchisor when a placement is made, and I’m paid the same regardless of your investment. Your net expense is zero, and you never pay me a dime.
Ready to Find the Right Franchise for You?
Matt Stevens | The Franchise Guy | Dublin, OH 43016
Call: (614) 595-3726
