Finding the Right Franchise For You

Buying a franchise can be the most important decision a person makes. For some people it means investing all the money they have. If you have an interest in buying a franchise, its important to understand that there is a process that should be followed.

This is the first of two articles pertaining to buying a franchise. In this initial article I’ll present the best way to select a franchise. The next article will explain how to evaluate a franchise opportunity.

Franchise industry sources indicate that there are over 2,500 franchises available in North America. Given the numbers of franchises, it can be a daunting task to select and evaluate the best franchise to fit your profile and expectations.

Choosing a franchise is the first part of the franchising process and there are three factors that should be guiding your decision:

1. Use objectivity when choosing a franchise.

When choosing a franchise avoid the tendency to choose a franchise based upon sizzle or glamour. Some franchises are heavily promoted but don’t use that as the sole indication that it’s a good franchise opportunity. Be cautious and be sure that the franchise is a business you can operate. If your background is in technical services and you feel uncomfortable making sales calls, then perhaps a business, which requires direct sales, might not be your best choice. If, however, you have a sales personality and enjoy interacting with people and selling, then you might be better off dealing with a service franchise, which requires those kinds of skills and experience. Your first approach is to consider those franchise categories that provide you comfort and demonstrate an opportunity for growth. The industry that the franchise is in should be part of your decision. For example, home healthcare and children’s services are hot industries.

2. Be sure you have the experience and knowledge required to operate the franchise you select.

Don’t end up being a “fish out of water” by getting involved with a franchise that is “foreign” to you. This does not alter the fact that many franchises are “cookie-cutter” in design, which means the operation is very structured. Nevertheless, people and management skills are an important component of any business operation no matter how well organized. If you don’t have the skills to operate the franchise, you may be forced to depend upon someone else. When you depend upon someone else, there could be a point in time when this person becomes so important to the business that he or she could literally hold you hostage.

3. Have the right amount of working capital available to invest in the franchise you select.

You need to have the right amount of capital necessary to start-up and operate the franchise. I would always suggest to prospective franchisees that whatever their cash flow model shows, that they put in a risk factor of ten percent or more for unexpected contingencies. Some cash flow statements are overly optimistic and don’t allow for a margin of error. In the real world, unanticipated events happen and one must be prepared for these events. Your available working capital will determine the kind of franchise you will be acquiring.

Once you fulfill your selection parameters, you can look at the franchise opportunities that fit the guidelines.

There are many resources available for identifying franchise opportunities. The Internet is an excellent vehicle for finding franchises. If you attend a franchise show you will have the opportunity to meet franchisor representatives face-to-face and this can provide you some experience. Even though, most franchises are not represented at these shows you may find one or two franchises that interest you.

If you have a specific franchise in mind, a franchise show may provide you the opportunity to visit this franchise in person. There are franchise publications that present franchise opportunities, which include descriptions of each franchise. I recommend that your first step should be to identify the industry segment, service or product that you are interested in. Select two or three franchises from that family group and then contact each franchisor to get preliminary information.

Following are the steps to follow:

1. In view of your experience and working capital, eliminate those franchises that do not qualify. As an example, if you don’t have financial experience or training, you can eliminate accounting and tax services. If your background and experience are non-technical, you may be quick to eliminate automotive services. In terms of working capital, you could rule out hotel franchises and high-end restaurants.

2. Choose franchise categories that appeal to you from a product or service standpoint and which are compatible with your business background and investment capability. Keep in mind that you can also use the Internet to do a search as well.

3. Once you narrow your choices down to particular franchises, you can use the Internet to review the franchise program since franchisors have their own website. This provides you a way to browse through franchise sites where you can request information online. You’ll also find out if certain territories are already franchised.

4. Review the information you’ve requested to see if it meets the criteria of your interest, experience and capital. Once you’ve narrowed your choices, you will want to speak to a franchisor salesperson in order to ask some key questions. With e-mail, you have the option of e-mailing direct questions to the salesperson.

Following are some questions you’ll want to have answered:



· Is your territory available? How are territories defined? Are they exclusive?

· How would you describe the franchise process?

· What are the steps that are followed?

· What is the initial franchise fee? What do you receive?

· What is the investment? What is the ongoing royalty?

· Any other fees, such as for advertising fund?

· Briefly describe the support you will receive pre-opening and post- opening.

· How many franchise locations have been added to the system in the past year? Any corporate-owned locations, and if yes, how many?

This is the information you’ll want to obtain at this stage in the process. The next step will be to evaluate the franchises that you choose so that you’ll make an informed decision and choose the best franchise for you.

Ed Teixeira is President of FranchiseKnowHow, LLC a franchise development firm. www.franchiseknowhow.com Ed has spoken and written numerous articles about franchising. He is the author of Franchising From The Inside Out.













Finding the Right Franchise For You - To learn more about this author, visit Ed Teixeira's Website.

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