It's Simple - Really

Last month, I touched on one of the more complex aspects of the due diligence process – Item 19s and Building P&L’s. This week, I want to simplify things and focus on what is really at the core of due diligence. At its heart, due diligence doesn’t have to be complicated, it's actually pretty simple once you understand the basics.

Let’s start with a fundamental question: when you buy a franchise, what exactly are you buying? A lot of people think you're buying the brand itself—things like the logo, the name, the reputation. But the truth is, what you’re really buying is a license to follow the franchisor’s business operating system.

The operating system is the backbone of the franchise. It’s the playbook that tells you exactly how to run the business. A good operating system is designed to help you reduce business risk in a predictable way. That’s the true value of the franchise system.

So, when you go through the due diligence process and create your long list of 150 questions to ask, here’s the thing to remember: at the end of the day, there are only two questions that matter.

1. Does the business operating system, when followed, reliably reduce business risk?
   This is the big one. If the answer is yes, then the system has value, will help you avoid costly mistakes, and increase your likelihood of success. If the answer is no, then the system is worthless —and this is the moment when you should seriously consider walking away.

If the first question is a clear ‘Yes’, then you move on to the second question.

1. Do I have the ability and willingness to follow the system?
   Can you follow the system? Do you have the skills, mindset, and ability to follow the proven steps the franchisor has laid out? One you understand the daily operations, the skills required, the training, the support, and what your role will look like—ask yourself if you’re genuinely ready and willing to follow the system. A great system is worthless if you can’t or won’t follow it.

If your answer to both questions is YES, then you’ve found a system that works and that aligns with your abilities. This means the franchise is worth serious consideration. It’s a match for your skills and expertise, and it has the potential to help you reduce the risks of starting and running your own business.

If both questions are answered positively, it means that if you choose to move forward, you’ll be doing so with confidence. You’ll know that the foundation is solid, that you’re following a system with a proven track record, and that the system aligns with your own strengths. That’s the starting point for making a smart, informed decision.

At the end of the day, due diligence is about more than just getting answers—it’s about understanding whether a franchise is a good fit for you. And it starts by asking the right questions and evaluating whether you can follow a system that works.