Pizza Franchise Due Diligence Questions

For any major purchase you need to do some due diligence, right?  When you buy a pre-owned car you read the CarFax, when you purchase a home you get an inspection.  When you buy a franchise the best type of due diligence to do is validation calls with existing franchise owners.

A validation call is a phone conversation with an existing franchisee of the franchise system to validate facts and assumptions about the franchise opportunity.  If the franchise you are investigating doesn’t encourage these calls RUN and RUN FAST.

 Here are some questions you want to ask on your validation call:

  • How was the initial training?  Did you learn everything you needed to?  Did you open for business being fully comfortable with the system?
  • How is the on-going support?  When you have a question or concern is it addressed quickly and easily?
  • Did your investment and startup costs stay within the estimates given by the franchisor?  Were there any surprise expenses or un-anticipated steps for opening
  • How is the marketing in the franchise system?  Do you take advantage of the online marketing programs the franchisors has?  What is your best source of new customers?
  • What kind of money are you making?  Would you mind sharing how long it took to break even or turn a profit?
  • Would you do it all over again

The last two questions are by far the most important.  It’s OK to ask franchisees about their finances.  They expect you to inquire about this.  Even if they are making good money the last question is the most telling.  No one has a time machine to fix past mistakes but most everyone loves sharing advice with others on matters they are knowledgeable on.  Interview three or four franchisees during your due diligence process to get a good flavor for the health of the franchise system.

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