Red Flags for potential franchisees

Franchise Spotlight: Red Flags For Potential Franchisees

International Franchise Expo welcomes attendees in NYC
(Image: Richard Spiropoulos)

Both questions are important to ask because it tells a lot about the system or the value of the system.

Report Card on Franchisor Employees and Executives

One warning sign in this regard would past experience of the executives within a franchise system. Be it the CEO or CFO, any vice presidents of franchise development, what past experience do they have and what are the systems they have worked at prior to this one? And is the system still growing or did the system get better after they left in terms of money or franchisee satisfaction? Just following the executive mindset can be critical to predicting the future or direction of the franchise relative to relationship in particular.

Social Media Sentiment

On Twitter, Facebook or Instagram. What kind of information do you find? Are consumers tweeting about how great the brand is? Or are there a lot of complaints about the brand? How are the online reviews about the brand? For franchise systems or concepts, looking at reviews for one location isn’t necessarily valuable, unless you are buying that location. No matter your relationship with the franchisor, consumers have to like the product and buy the product and they need to believe that it’s a great experience. If they are seeing a lot of social sentiment around the brand, that’s a red flag. You’ll have to find out what’s creating all the negativity and the bad sentiments.