Why Validation Calls Are Your Most Important Due Diligence
The Franchise Disclosure Document tells you what the franchisor wants you to know. The validation call tells you what you actually need to know. No FDD, attorney review, or Discovery Day presentation can substitute for a real conversation with someone who has been living inside the franchise system for 1, 3, or 7 years.
Existing franchisees have no financial incentive to mislead you. They have already bought in. They have experienced the training, the support, the operations, the relationship with the franchisor — all of it. A single candid conversation with a 3-year franchisee can tell you more about a system than reading a 400-page FDD cover to cover.
Yet most prospective franchisees do not do enough validation. The industry standard recommendation is to call at least 10-15 existing franchisees, but the average buyer calls 3-4. This is a significant missed opportunity.
How to get the list: Item 20 of the Franchise Disclosure Document includes a complete list of all current franchisees with their names, addresses, and phone numbers. It also lists former franchisees from the last fiscal year with their last known contact information. You have a legal right to contact any franchisee on this list. A franchisor who discourages this is a red flag.
How Many Franchisees Should You Call?
Here is the minimum viable validation research plan:
- 10-15 current franchisees — target a mix of high performers, average performers, and newer operators
- 3-5 franchisees in similar markets to your target location (similar demographics, metro size, competition level)
- 3-5 long-tenured franchisees (3+ years) who have seen multiple business cycles
- 3-5 former franchisees from the Item 20 disclosure — these are often the most candid
- 1-2 multi-unit operators if you are considering owning multiple units
The franchisor's development team will offer to set up "reference calls" with happy franchisees. Take those calls — but also independently contact franchisees off the Item 20 list who were not offered to you. You need the full picture, not just the highlight reel.
Category 1: Financial Performance (10 Questions)
These are the most important questions you will ask. Be direct and specific. Most franchisees will answer honestly if you approach the conversation with genuine curiosity rather than skepticism.
Financial Questions
- What is your approximate annual gross revenue? Is that typical for the system, or are you above or below average?
- What is your approximate net income or owner's salary from this business annually? Is that before or after debt service?
- How long did it take you to break even — meaning when did you stop losing money each month?
- How long until you paid back your initial investment? Are you on track to do so within the timeline you expected?
- How did your actual revenue in year 1 and year 2 compare to what the Item 19 data suggested? Were there surprises?
- What were the biggest unexpected costs you encountered that were not in the FDD's estimated investment range?
- What is your total ongoing fee burden as a percentage of revenue — royalty, marketing fund, technology, local advertising combined?
- What are your largest operating cost categories, and which ones were harder to control than you expected?
- Looking back, was the initial investment range in the FDD accurate, or did your actual startup costs come in higher?
- If you had to start over, would you invest in this franchise again knowing what you know now?
Use FranchiseStack's Due Diligence Tools
Prepare for franchisee validation calls by understanding the FDD first. Our FDD Checker extracts key financial data from Item 19 and system health signals from Item 20 automatically.
Category 2: Franchisor Support (10 Questions)
The franchisor's support quality is what separates a valuable franchise from an expensive license fee. These questions expose the gap between promised support and delivered support.
Franchisor Support Questions
- When you have an operational problem and call the support line, how responsive is the franchisor? Hours, days, or longer?
- How would you describe the quality of the initial training program — was it thorough enough to prepare you for the reality of running the business?
- Does the franchisor provide meaningful ongoing training and updates, or is it mostly just the initial onboarding?
- Do you have a dedicated field representative or support contact at the franchisor? How often do they visit or check in?
- How does the franchisor handle it when franchisees raise concerns or complaints? Do they listen and respond, or do they dismiss?
- Is the operations manual useful in practice — do you actually refer to it, or is it outdated and not aligned with how things really work?
- Has the franchisor made significant improvements to the system, brand, or technology since you joined? What is the pace of innovation?
- Do you feel the franchisor genuinely wants you to succeed, or does it sometimes feel like they are just collecting royalties?
- Is there an active franchisee association or advisory council? Does the franchisor genuinely listen to franchisee feedback?
- How transparent is the franchisor about how the marketing fund is spent? Have you seen meaningful returns from the national marketing investment?
Category 3: Operations and Day-to-Day Reality (10 Questions)
What does a typical week actually look like? This is what no marketing material will ever tell you — but a franchisee 18 months in will tell you everything.
Operations Questions
- How many hours per week do you personally work in the business? Is that what you expected when you bought in?
- What does a typical Monday look like for you? Walk me through your day.
- What is the hardest part of running this franchise operationally — staffing, customer service, supply chain, something else?
- How difficult was the hiring process? Is turnover a persistent challenge in this business model?
- How long did it take before the business was running smoothly enough that you didn't have to be on-site every day?
- What is the franchisor's technology platform like to use day-to-day? Is it reliable, or are there frequent issues?
- Are the vendor and supplier relationships the franchisor has set up beneficial, or do you feel you could source product/supplies cheaper independently?
- What is the most time-consuming administrative or compliance task the franchisor requires of you?
- Have you ever had a conflict with the franchisor about how to run your business? How was it resolved?
- If you could change one thing about how this franchise is operated or how the system is structured, what would it be?
Category 4: Territory and Competition (5 Questions)
Territory is one of the most common sources of franchisee-franchisor conflict. Understanding how territory works in this specific system could save you years of frustration.
Territory Questions
- Is your territory exclusive? Has the franchisor ever opened another unit that competes with your territory or customer base?
- How is the territory defined — by geography, by customer type, by ZIP code, or some other method? Is it clearly documented?
- Do you feel your territory is large enough to support the revenue you need to achieve your financial goals?
- Is there meaningful competition from independent businesses or other franchise brands in your area? How does the brand hold up competitively?
- Has the franchisor opened corporate-owned locations in your market, or offered the brand through channels (like delivery apps, kiosks, or licensing) that compete with your revenue?
Category 5: What They Wish They Had Known (5 Questions)
These open-ended questions often produce the most valuable intelligence. Give the franchisee space to share things you would never think to ask about.
Open-Ended Questions
- What do you wish someone had told you before you bought this franchise that they didn't?
- What was the biggest misconception you had about this business going in?
- If your best friend was considering this franchise, what advice would you give them?
- What type of person thrives in this franchise, and what type of person tends to struggle?
- What is the single most important thing a new franchisee can do in their first 90 days to set themselves up for success?
Category 6: Red Flag Questions (5 Questions)
These questions are specifically designed to surface systemic problems that franchisees might not volunteer proactively. Ask them directly.
Red Flag Detection Questions
- Are you aware of any franchisees who have filed complaints, lawsuits, or formal grievances against the franchisor? What was the nature of those complaints?
- Do you know of franchisees in the system who are struggling financially? Is that a common issue or isolated?
- Have you ever felt the franchisor was not acting in good faith — on royalties, territory enforcement, supply pricing, or another issue?
- Do you feel the brand is trending in the right direction — gaining relevance in the market — or has consumer interest been declining?
- On a scale of 1-10, how likely are you to renew your franchise agreement when it comes up? Why?
Category 7: Questions for Former Franchisees (5 Questions)
Former franchisees listed in Item 20 are often the most valuable research sources — and the most overlooked. They have nothing to gain by protecting the franchisor and everything to gain by helping a prospective buyer make an informed decision.
Former Franchisee Questions
- Why did you leave the system? Was it a voluntary exit (retirement, life change, profitable sale) or a forced exit (financial failure, franchisor termination, non-renewal)?
- Did you achieve the financial performance you expected when you invested? What was the gap between expectation and reality?
- How did the franchisor treat you when things were not going well? Were they supportive or adversarial?
- If you had to do it over again, would you buy this franchise, a different franchise, or no franchise at all?
- Is there anything a prospective buyer absolutely needs to know about this franchise system that is not in the FDD?
How to Interpret What You Hear
After completing your validation calls, look for patterns — not outliers. Here is a quick interpretation guide:
| Signal | What It Means | Action |
|---|---|---|
| Multiple franchisees raise the same concern | Systemic issue, not an outlier | Probe deeper; consider walking away |
| Unanimous positive responses only | May be reaching only approved references | Contact more franchisees independently from Item 20 |
| Item 19 doesn't match reality for most | Misleading financial disclosure | Major red flag; reassess your investment thesis |
| Multiple franchisees would not renew | System declining or economics deteriorating | Serious red flag |
| Franchisees reference a specific support person highly | Individual-dependent support (person could leave) | Ask whether that person's role is institutional |
| Mix of positive and negative with consistency | Honest, realistic picture | Normal — weigh the themes against your risk tolerance |
| Former franchisees all left for personal reasons | Healthy system with normal attrition | Positive signal |
Validation Call Checklist — Before You Start
- Pull Item 20 from the FDD and highlight 20+ franchisees to contact
- Include former franchisees — they are the most candid sources
- Schedule 30-45 minute calls — not quick 10-minute chats
- Take notes during every call and review patterns afterward
- Contact franchisees independently of the franchisor's suggested reference list
- Do your calls BEFORE Discovery Day so you can ask pointed follow-up questions at the event
- Never sign an agreement before completing at least 10 validation calls
No amount of marketing materials, Discovery Day hospitality, or FDD review substitutes for honest conversations with people already inside the system. Use the FDD Checker to prepare before your calls, and our complete franchise buying guide to structure your full due diligence process from start to finish.