How to Run Franchise Validation Calls That Show You the Downside

Validation calls are conversations with current franchisees before you buy. Done well, they are the most useful diligence available to you. Done poorly, they confirm what you already wanted to hear.

The difference usually comes down to two things: who you talk to, and what you ask.

Who to call

When I evaluate a franchise, I want to speak with owners across three groups:

• Top performers

• Typical, average performers

• Owners who struggled or took longer to stabilize

Top performers show you what is possible. Average and slower owners show you what is likely. Your capital plan has to survive the likely case, not the best one.

Many franchisors give buyers a short list of owners to call. Those owners are often the strongest in the system. That isn't dishonest, but it isn't a representative sample either.

Ask directly for owners who are not top performers, including those who took longer to get going. If the franchisor won't connect you with a representative mix, treat that as a stop sign. You can also find owners yourself. The Franchise Disclosure Document (FDD) lists current and recently departed franchisees with contact information.

Talk to recent and former owners

An owner who opened eight years ago remembers a different market, different construction costs, and different wages. Prioritize owners who opened in the last two to three years. Their ramp looks most like yours will.

Call at least one or two former franchisees too. Owners who sold, transferred, or closed often speak most candidly about what went wrong.

What to ask

Most buyers ask whether owners are happy. That's a fair question, but it tells you little about your capital risk. Focus on cash and timing.

Capital and runway

• What did it cost you all-in to open and fund your losses until you were cash-flow positive after debt service?

• How much did you spend beyond the FDD’s estimated range, and on what?

• How many months were you cash-flow negative? What was your worst month?

• If you did it again, how much working capital would you want on day one?

Ramp reality

• Roughly what was your monthly revenue in months one through six?

• At month twelve, were you profitable, at break-even, or still losing money after your loan payment?

Staffing

• What was payroll as a share of revenue early on, compared with now?

• What is the minimum staffing you can’t go below, even when it’s slow?

Support and fit

• What support was actually useful in the first 90 days? What was missing?

• Would you do it again, knowing what you know now?

• Who should not buy this franchise?

Listen for patterns, not stories

One bad experience can be bad luck. Three owners describing the same cost overrun or the same slow ramp is a pattern. Write down the numbers each owner gives you and compare them side by side.

Also notice how owners explain struggles. If every slow location is blamed on a bad operator, ask what the system did to help. Truth lives in the misses.

The goal

Validation isn't about whether the concept can work. It's about whether you can survive the ramp with the capital you have. The right calls, with the right questions, will tell you more than any projection.

Next step: Download the free Capital Risk Checklist for the seven questions to answer before you sign. If you're evaluating a franchise now, book a free 30-minute call.