Beware of 'Song Birds' When Doing Homework on a Franchise
The best source of information when you’re researching a franchise is to talk to the existing franchisees. You can validate what you’re hearing from the franchisor during these calls and you can also develop a keen sense of how everything is going in the system by listening carefully and reading between the lines in terms of not just what they are saying but also how they are saying it.
One thing to keep in mind, though, you have to ensure that you’re receiving input from a valid cross-section of the existing franchisees. A franchisor is required to give you a list of their franchisees so you can call whichever ones you want, but it is also fairly common for franchisors to steer you toward selected franchisees for what the industry calls validation calls.
This steering is not necessarily a bad thing, but it definitely represents a risk to you if the franchisor is purposely steering you toward only owners who will paint a picture rosier than the system-wide reality. These excessively positive "validators" are known in sales circles as “song birds,” but their melody can be harmful to you if you’re not careful.
The following are five steps you can take to protect yourself from song bird abuse:
1. Make sure you, personally, select a reasonable number of existing owners to call. Do not settle for calling only the ones recommended by the franchise salesperson. Make your decisions based on a good sampling of newer versus experienced franchisees, differing market sizes or geographical regions for their business location, and different sexes, ages and occupational experiences of the primary operator.
2. Don’t make it easy for the franchisor to steer you. If you are looking for variety in the characteristics of the existing franchisees, ask the franchisor for assistance. But ask the franchisor the same questions about lots of franchisees on the list.
For example, select 20 to 30 of the existing franchisees on the list and ask the franchisor the same questions about each one, such as their background prior to entering the business, the principle operator and how long have they been operating. This will take only a few extra minutes of your time and gives you the information you need to decide who you want to call. If you simply ask the franchisor for some examples of certain characteristics, like operators with more than years' experience, you’ll probably receive the three most positive folks who fit that description.
3. Make sure you visit with some franchisees who are struggling or have a beef with the franchisor. No system has all their franchisees in perfect alignment all the time, so there will undoubtedly be a few who are struggling or upset about something. You are looking for the full spectrum of potential input available, so if you aren’t finding some facing challenges, keep calling until you do. Pay close attention when you get a grump, because you will need to decide if you think his or her complaints or issues would be relevant to you if you become a franchisee (which is not always the case).
4. Go beyond validation conference calls. Many franchisors, especially younger or rapidly growing systems, use scheduled conference calls to facilitate validation. This is an efficient method for giving lots of prospects access to busy franchisees, but there are a few rules of the road you need to remember. First, the franchisor should not be a participant on these calls because that’s going to influence what the franchisees say. Second, there should be the ability to ask questions of the franchisee on the call so you can expand on any prepared presentation. Third, always make sure you contact other franchisees who are not included in the scheduled calls to ensure that they tell the same story.
5. Take everything you hear with a grain of salt. The purpose of these calls is to gather additional facts and information you can use in your evaluation, but it is also to develop a sense of the culture and attitudes of the system. It is entirely possible that you’ll hear input that is either more positive or negative than normal from any of the calls you make based on something as random as the last customer interaction the franchisee had just before you called. Don’t overreact based on a comment that may have been indicative of nothing more than which side of the bed they got up on that morning.
Two final thoughts you should also consider. First, fairly new franchise systems usually don’t have many franchisees to call for validation, and the ones they have usually don’t have much experience. These low numbers can increase the risk that you won’t be able to get a clear picture during these calls because there may not be enough of a track record in the franchise system to provide such clarity. Be aware of this risk as you evaluate young systems.
Finally, take your time so you do a thorough job on this process. You should plan on spending at least 10-20 hours on the phone during this process, making initial calls and also follow up calls to owners you’ve already spoken with. Taking the time to do this right can pay big dividends in terms of helping you avoid costly mistakes in selecting the right franchise for you.