Tweet

10 Tips For Investing In A Franchise

Written by: Joel Libava

Article Overview: Keep these 10 Tips in mind, when starting your search for that perfect franchise...

10 Tips For Investing In A Franchise

1. Start your exploratory process by looking at what your business skills are. Are you great at sales and marketing, or operations? Are you a manager of people, or would you prefer having no employees?

2. Are you comfortable using someone else’s systems and procedures? Remember that franchising is a license that you purchase to have the right to use the system. Don’t invest in a franchise, if you won’t use the system. Start an independent business instead.

3. Do you have family support? Starting any business is a family decision. Family members must understand that there will be demands on your time, and that they will need to be supportive of your decision.

4. Do a net worth statement. Subtract all your liabilities from your assets. The difference is your net worth. In addition to the down payment required by lenders, do not forget about your living expenses during the start up period. You should have funds set aside for 6-12 months, while your business ramps up.

5. When you find some franchises that interest you, visit and talk to as many franchise owners as possible in those systems. Are you like them? Are they happy with their decision? Would they do it again?

6. Don’t rush the research process. Be thorough, and talk to both happy and UNHAPPY franchise owners. Be willing to discuss what you are hearing with the franchise company’s representative.
See how they react to your questions.

7. Read through the Uniform Franchise Offering Circular/FDD. This is the required legal document that will be sent to you by the franchise company. Write questions down as you go, and be prepared to ask them to the franchise company representative.

8. When you have narrowed your search down to one opportunity, visit the franchise company’s headquarters. Meet the executive and support teams in person. These are your business partners.
A good franchise company is also checking you out. They want the right people for their franchise.

9. When you get back from your visit, go back through your notes, and see if you have missed something. If not, now is the time to have an attorney familiar with franchise law look over the franchise documents. The attorney should point out things you may have missed, and explain both party’s legal obligations. You should also have a CPA help you decide on a business structure for your company, if you decide to move forward, and go over financial information.

10. Gut check time. You have done the data collecting. You have met franchise owners. You have visited company headquarters. Does the opportunity “feel” right? If so, move forward. If it does not feel right, don’t do it. There will be other opportunities. Really.

Related Articles
  This is the best time to invest in yourself and buy a business
  Purchasing a Start-Up Franchise? Here are some Advantages and Disadvantages
  Seven Questions to Ask when Starting a Franchise
  10 Tips for Selecting the Best Franchise
  Why Franchises are Good Investments

Article Tags: 12 months, business partners, business skills, company representative, family decision, family members, fdd, franchise company, franchise owners, franchises, independent business, legal document, lenders, liabilities, living expenses, opportunity visit, ramps, sales and marketing, t rush, uniform franchise



Related Forum Posts
Business Tips - How about: Tips for managers to handle employees more effectively? Tips on how to deal with difficult customers? Tips on how to deal more effectively with suppliers? The only three I have in mind right now, but will try to come up with something else. Chris
Re: Enticing Franchises - Top 9 List - All Franchise listed above are in millions of dollars. Do you have the list of Franchise in thousands
Re: Info for would be franchisers... - [quote="Sebastien":1d29sdv1]Like Franchise Times, Franchise Update is a very practical magazine. There is no blah blah, just straight facts that anyone in the franchise community can relate to. I just want to mention that all these magazines are NOT franchisee oriented. I mean these magazines are for franchise professionals. If you're looking to buy a franchise, you won't find much information in there. To answer your question, getting published in Franchise Times was fairly easy. I don't want to brag too much but I think I am known in the franchise industry. I was the marketing guy at Franchise.com for a few years before joining my new company, the World Franchising Network. So people know me and I have a very good relationship with Nancy Weingartner, the Managing Editor at Franchise Times. I was talking with her at the last Franchise Expo South in Miami and she mentioned she'd like me to be profiled. I was like "ok, sure!". I like this franchise executive profile thing in Franchise Times as it is rarely BS. People are usually really natural in there.[/quote:1d29sdv1] Thanks for the follow up Sebastien! And I can't say that I'm surprised that networking with the right people and managing your relationships with them properly are the keys to being published. I guess the old adage holds true of "it's not who you know, but who knows you" that's important.
how much for a franchise fee? - Dear Colleague There is no easy answer to this question. Things to consider: [list=] The sizeof the Franchise Clent base Expected Turnover Intellectual Property costs (recoup) Number of Franchises Number of employees Original Set up costs Franchise admin costs An example: A franchise that I was involved in setting was to a simple "lawn mowing/home repair" franchise. The Franchise included national/local advertising - preparation of client lists - general admin - central accounting etc The Franchise involved 300-500 clients - and an annual turnover of about $300,000 . The annual franchise fee was $30,000. Hope that this gives you some idea Take care Ian[/list]
Re: Franchise Surveys - Another good tool to researching a franchise is to speak with their existing franchisees. This contact information is included in most Franchise Disclosure Documents. In order to get a Franchise Disclosure Document or FDD as it is often referred to, you will have to complete a basic franchise application. The franchisor will then usually provide you with the FDD at that time. Included in that book of information is a list of the existing franchisees, the contract, the investment information etc... This information is required by Federal Law to be disclosed to your prior to making a purchase. So be sure to do your research and start with the Franchise Documents to get the initial information.


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Tweet

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

Are You Listening?

Too Many Sales Reps Are Wimps

How To Be A Management Legend

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.