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Seven Steps to Choosing a Franchise

Guest post by: John Henning

Article Overview: Franchising is a wonderful way to go into business for yourself. So many things have already been established for your benefit: branding, marketing, processes, products, systems, etc. Building a business through franchising has been so successful that franchised businesses generate jobs for more than 18 million Americans and account for 10 percent of the private-sector economic output, according to a study recently released by the International Franchise Association Educational Foundation.

Seven Steps to Choosing a Franchise

Franchising is a wonderful way to go into business for yourself. So many things have already been established for your benefit: branding, marketing, processes, products, systems, etc. Building a business through franchising has been so successful that franchised businesses generate jobs for more than 18 million Americans and account for 10 percent of the private-sector economic output, according to a study recently released by the International Franchise Association Educational Foundation. If you are convinced that you want to investigate franchising for your next career move, how do you go about finding just the right one?

This is one subject about which much as been written. Everyone has their own version of what you need to do to find that one, perfect concept for you and for your market.

Here is our recommended approach of determining what to look for in a franchise that will meet your needs, expectations and goals:

STEP 1

Before you start looking at franchises, take stock of that most important component of the equation - YOU.

- What skills, experience and interests do you have?

- Consider your past jobs and determine what you liked best and least about them; then make a list of your strengths and weaknesses.

- How much money can you invest and how much would you like to make?

- Are you comfortable managing others or would you prefer to work alone?

- Where do you want to work? Are you willing to relocate?

- What hours are you willing to work while the business ramps up and what lifestyle expectations do you have after the business is established?

- How do you feel about selling and the sales process?

By starting with a list of what you have to offer and what you need from a business, you can create a strategy and model for your research.

STEP 2

Keep an open mind, it is best to keep all options open when considering a franchise.

An inexperienced person may approach the process by thinking, "Well, I love donuts. How about a donut franchise?" And after spending days or weeks of research on Krispy Kreme, Dunkin' Donuts and others, the individual may find he doesn't have the required capital, the territory he wants is not available, and he'd have to give up weekends if owning a food franchise.

Another ineffective way to begin your franchise research is to lock yourself in to one or two concepts. If you think, "I'll only look at ice cream and exercise franchises," you may miss finding that that gem of a concept that would mesh perfectly with your needs.

With thousands of franchise companies available, keeping an open mind is the best strategy you can employ to get on the ground floor of that new, hot concept or to find something that will really take off in your market.

STEP 3

Let's say you've found an assortment of franchises that look promising. What do you do next?

You can contact the franchisors and request information about their concepts. You will probably get call from someone in the franchise development department who will gauge your interest and advise you if the territory you seek is available.

You can also contact a franchise consulting company to help you through the due diligence process. Generally these consultants will help you with no up front fee. Here is one we recommend: United Franchise Connection.

Keep notes on your impressions. Are their materials professional and up-to-date? Are you treated courteously by a friendly and knowledgeable member of the corporate office? Are your questions and concerns answered to your satisfaction?

What you see from the company at this time may be an indication of the type of support you would receive as a franchisee in their system.

STEP 4

Your next step is to read the company's FDD (Franchise Disclosure Document), a document every franchise in the United States is required to provide. From this you will learn the history of the company, the training and marketing programs, and what costs, royalties and fees you will be required to pay.

Some franchisors also provide earnings claims in the FDD that will help you estimate the potential of the business.

The FDD is full of information about the franchise and it clearly explains the responsibilities of the franchisee (you) and the franchisor. Your FDD review and understanding is a very significant part of the research process.

By paying attention to what you discover in a company's FDD, you can weed out franchises that just don't measure up. Some warning signs of a franchise that is facing challenges are extensive litigation with franchisees or a closing rate of units greater than what's being opened.

STEP 5

We consider this step to be of monumental importance when judging the likelihood of finding happiness in a particular franchise: CALL EXISTING FRANCHISEES!

Existing franchisees are your best source of information for finding out what really happens in a business on a day-to-day basis. You can ask what they like and dislike about the business, if they are happy with corporate support, and even get a feel for the type of earnings a franchise makes.

Gather a variety of opinions and you'll get a clear picture of not only the franchise itself but of how you'd fit into the organization. That is why this step is so significant to your being able to make a definitive decision.

STEP 6

Your next step is to narrow down your choices. Okay, maybe it's not all that easy. Let's review what you've done so far:

1. Made a list of your strengths, experiences and needs

2. While keeping an open mind, found some companies that look promising

3. Requested information

4. Reviewed the FDD

5. Talked with existing franchisees

Hopefully you've now found one or more companies that will meet your needs.

When you've made it this far, it's time to go to Discovery Day (an on-site meeting with a franchisor). At this meeting you will be introduced to the top people in the home office and you may make a visit to a local franchisee, allowing you to ask even more questions and maybe to get some hands-on experience with the business.

Discovery Days are very interesting and exciting. When you leave, you will have a good understanding of the franchise. Don't forget that this is a two-way street. They'll be evaluating you as thoroughly as you evaluate their business.

STEP 7

The last step, of course, is making the final decision. Like any major decision, you will be filled with anticipation and anxiety, excitement and fear. Those are very normal feelings, experienced by almost everyone.

But if you've done your homework and followed the steps as outlined, you should be very comfortable with your decision. Congratulations - you're ready to be a franchisee!

Related Articles
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  Which Franchise is right for you How do you choose
  Top tips for franchise success
  Why You Should Work With a Franchise Consultant
  Steps to a Successful Franchise Experience
  Questions to Ask Before Buying a Franchise
  A Research Report: Good Reasons for Buying a Franchise Business
  What Information Franchises Want About Me and Why
  Best Franchise Opportunities
  What Information Does the Franchisor Want About Me?
  What You Should Know About Your Franchisor Before Signing On
  Researching a franchise if you find yourself Unemployed
  Own Your Own Franchise and never get Fired Again
  Franchising with all its Success
  Advantages of Investing in a Franchise
  About 60% of all franchise opportunities have less than 50 units.
  Buying A Franchise
  Benefits of Franchising
  Why Use a Franchise Consultant?

Article Tags: finding the right franchise, franchise education



Related Forum Posts
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.
Re: Info for would be franchisers... - [quote="Sebastien":2gam0klq][quote="BuzzAroundBooks":2gam0klq]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.[/quote:2gam0klq][/quote:2gam0klq] That is really what I look for in any industry publication. We lead busy lives and when people fill their magazines with fluff, not only does it benefit no one, but it makes us truly appreciate those that don't. Thanks!


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