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Narrowing Your Franchise Search

Written by: Bob Richman

Article Overview: Searching for franchises and business opportunities is easy. Narrowing the search to a manageable level, however, takes some discipline. There are more franchises out there than you would ever imagine. Finding the right one for you will take some time, research, and contemplation.

Narrowing Your Franchise Search

There are more franchises out there than you would ever imagine. Finding the right one for you will take some time, research, and contemplation. Start by considering a few key things about yourself, and then limit your explorations to companies that meet your goals and interests, fit into your budget, and that you have the ability to operate successfully. Once you have that initial list, start narrowing your search by reviewing some key information about the franchisors you are considering.

This is an important exercise. If you don't narrow your search you will likely be overwhelmed with information once you begin to do heavy research.

A few key things about yourself

Your Investment

If you have carefully gone over your own financial information, you should know exactly how much you want to invest as well as the highest possible number that you can afford to invest. Keep in mind that you will need start-up costs, franchise fees, back-up funds, and enough to live on without an income for at least one year, most likely two. You should end up with a range from the ideal to the highest possible. Only investigate franchises that fall within your range.

Your interests and goals

If you have worked in education your entire career and your goals include working on a more focused area within early childhood education, a muffler shop is probably not going to meet your needs. Be clear about which industries interest you. If you have thought about working in an industry before, even if you have no experience in that industry, that might be something to consider. If your goals include working with a particular group of people, or offering services rather than selling products exclusively, look for franchises that will meet those needs. Remember that you may be doing this job for the next 20 years-be sure it is something that you will enjoy doing.

Your skills and abilities

Matching your own skills and abilities to the right kind of franchise is an important consideration. If you don't have the skills or abilities required to perform the work, consider whether you can get the skills through training. If you aren't sure, this isn't the right industry for you. Consider that you are your own boss and that if your employees have some kind of emergency, you have to let go of employees to cut costs, or any other situation arises in which you would have to complete the work, could you do the job?

Once you have considered these things you should have a rough roadmap of the appropriate industries, the types of franchises, and the right investment level for you. The next step in narrowing your search is to gather information on the franchises that might fit the bill.

Finding out about the franchises that might suit your needs

There are many ways to go about compiling a list of possible franchises that meet the above criteria. Websites, business journals, industry awards, and franchise exhibitions are probably the best way to look into which franchises are out there. Take some time to explore what is on the market, what's hot, and where the currents trends are. Keep a journal or notebook of possible interests. If you visit a franchise location for personal reasons and are impressed by what you see, consider that a franchise worth exploring.

Franchise exhibitions range from single franchises in a small setting to entire exhibitions with a wide range of franchises exhibiting together. Keep that journal or notebook handy and take notes. Beware of any franchise salesperson who is pressuring you for a once-in-a-lifetime opportunity that won't be around tomorrow. Experienced franchisors are looking for franchisees that will be successful and invested in their brand; if the salesperson is telling you that it is a good fit and you don't think so, walk away. Remember that this is your investment and you are looking for the right business opportunity to fit your goals. Only you know what the right fit will be.

Before you take the next step, you should have a pretty good list of franchises that meet your goals, that you can afford, that do the kind of work you are interested in doing, and that you think might suit you. Narrowing that list of possibilities to true prospective opportunities involves a great deal of research, but will yield the rewards of making a good, informed choice for one of the most important investments you will ever make.

Narrowing the search from possible to probable

Ask yourself and the franchisor these questions. Make sure you both understand how the answers would impact you if you were to become a franchisee and also how comfortable you are with the responses.

Demand

How much demand is there for this type of product or service? Is this likely to be a product or service that will still have a high demand in ten years? Is this a trend-setting company or a trendy company? Can you evolve this business over time so that the demand for goods and services stays consistent and strong?

Competition

How much competition exists for the goods and services offered? Is the market flooded for this particular industry? How about for this franchise? If there is an extremely high number of franchises, it is likely that the competition between individual units exists to some degree as well. What is their market penetration?

Brand recognition

Newer and smaller franchise organizations may not have as high a level of brand recognition as more establishes franchises. If you feel it is a franchise that has the potential to grow and think you may just be getting in on the ground floor, that isn't necessarily a bad thing. Newer and smaller franchises may offer you more flexibility, but they may also not be able to offer the support services at the same level a larger franchise can. Franchises that grow too fast can be stretched thin. Be sure you're comfortable with the risks associated with a smaller franchise. On the other hand, if the franchise has been in business for a long time and still doesn't have much name recognition, ask yourself why not? Look at their growth and projections and their financials to determine the strength and goals of the franchisor.

Training and support

What kind of training and support does the franchisor offer? Is there an associated cost? What kind of continued training and support do they offer after you've opened your doors? If you have problems, who would you call? Is there someone available for a site visit to help you rectify operational difficulties? Do they offer the initial training that will bring your skills and abilities up to a level that you feel will set you up for success?

Expertise

How much experience does the franchisor and his/her staff bring to the table? Does the franchise as a whole have more experience in entrepreneurial endeavors or in franchise management? How many different kinds of experience and expertise will be available to both the franchise as a whole and to you as a franchisee?

Growth

How much growth potential is there for this franchise? For this industry? Is there a projected growth plan that you feel is reasonable? Growing too fast or too slow can both be bad situations in business. You want to look for a franchise that has a reasonable and consistent growth plan, can show you that they have been meeting their planned growth, and that can manage the growth to everyone's best interest.

Compare

There is definitely more than one franchise offering a similar product within the same industry. Compare what they all have to offer. You may be able to get a better deal from another franchisor, so don't settle for the first probable franchise in line. When you're comparing similar franchises, look for things like start-up costs, royalties, inventory, territory, stability and growth, and how much ongoing training and support they each offer.

Substantiated earnings

If a franchisor offers you information on your earning potential be absolutely positive that they also offer you proof substantiating their projections. This is a requirement from the FTC. If the franchisor does not have proof or is unwilling to give it you, run.

Investigating the probable options

You've narrowed your list. You think you know which franchise you want to invest in, and you're ready to investigate more thoroughly exactly what that franchise is offering. This is the point at which you look at their documentation and talk to their existing franchisees to make some very important determinations. You're close! You've done a lot of hard work and research to get to this point, so don't stop now. The final investigation of the couple of franchises you are considering will tell you exactly what you'll get for your money and whether it is a good investment for you. The Franchise Offering Circular, also known as the Disclosure Statement, is the place to begin. You will get the information you need to finalize your investigation from this document-though by no means through just what is IN the document.

Professional Advice

When all is said and done, you have researched and investigated to your wit's end and have made some decisions, get a second opinion. There is nothing like professional advice to back up your decisions. A Franchise Attorney and an Accountant with experience in franchise businesses are essential. Don't try to extract and digest all of the information presented to you yourself.

Franchise attorney

You need a franchise attorney to review any contracts or documents and explain to you exactly how they will impact you. A good attorney will know the nuances that will most surely not occur to you at all-after all, they're attorneys reading other attorney's work.

Accountant familiar with franchise businesses

Having an accountant familiar with how franchise businesses operate is essential to your investigation into the financial stability of your investment. This person can look at the financial statements and tell you whether this is a strong company or if the franchise is risky and attempting to show themselves out in the best possible light.

Banks and credit

Review any loan offers or agreements with your own banking institution. You may be able to get a better deal somewhere else. If you can get a credit report on the franchise to see how well they manage their debt this would be ideal.

Other resources for checking out any complaints against the franchisor or the brand, or to verify the status of a franchise, would be the Better Business Bureau and the Federal Trade Commission.

Narrowing your search is critical. We've just outlined a litany of items that you'll need to consider. To do this for every franchise you think you might be interested in is more work than you'll need to do.

Narrow your search early, and continually, so that all of your efforts are spent researching deeper into the very best prospective companies.

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  Resources and Help for your Franchise Business

Article Tags: budget, contemplation, early childhood education, exercise, explorations, financial information, franchise fees, franchises, franchisors, job, muffler shop, offering services, skills and abilities, time research, will take some time



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