Franchisee validation

What it means

Validation is often the single most revealing part of due diligence, because existing and former franchisees have no incentive to sell you the system and can describe how it actually performs. It tests the franchisor's claims against lived experience of running a unit day to day.

The Franchising Code of Conduct 2025 makes validation practical by requiring the disclosure document to include details of current franchisees and, importantly, franchisees who have left the system in the last financial year, with contact details where consent has been given. This list is your starting point, but you should reach beyond it to avoid speaking only to hand-picked advocates.

Effective validation covers both the positives and the pain points: real revenue and margins, hidden or rising costs, the quality and cost of support, marketing-fund value, dispute history, and whether people would buy in again. Patterns across multiple franchisees matter more than any single opinion.

In practice

Prepare a consistent set of questions and speak to as many franchisees as you reasonably can, deliberately including former franchisees, who often explain why people leave. Ask about actual figures versus expectations, real support levels, unexpected costs, and how disputes were handled.

Cross-check what you hear against the disclosure document, any earnings information, and the Franchise Disclosure Register. Consistent negative themes, a high rate of departures, or franchisees who are reluctant to speak candidly are all signals to investigate further before committing.

A real example

Validating a retail franchise, a buyer calls twelve current and all four departed franchisees listed in the disclosure document. Three leavers independently mention that a mandatory fit-out refresh cost far more than expected, a cost the franchisee had not budgeted. Armed with this, the buyer adds a capital-expenditure buffer and raises the issue directly with the franchisor.

Franchisee validation — FAQs