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Franchise Buying Tips: Purchase Without Passion

Written by: Mary Tomzack

Article Overview: Pop quiz: what's the number one rule of buying a franchise? If you answered: meet with the franchisor, go with a popular brand, or read the UFOC - you're wrong. The first rule of buying a franchise is this: Do Not Buy On Emotion.

Franchise Buying Tips: Purchase Without Passion

Pop quiz: what's the number one rule of buying a franchise? If you answered: meet with the franchisor, go with a popular brand, or read the UFOC - you're wrong. The first rule of buying a franchise is this: Do Not Buy On Emotion.

Yet that is exactly what most franchisees do. It's good to be enthusiastic about your future business plans. It's bad to fall in love with the deal and let your emotions take the lead. Think that won't happen to you? If you talk to a hundred franchisees you will find that few knew exactly what they were getting into. Most are sensible people with plenty of information who selectively twisted the facts to support an emotional decision.

Give your emotions a cold shower and use this list of safeguards to help you cut through the hype and make an objective decision:

1. Do the math – Have your accountant make sure the figures and projections add up.
2. Get professional help – Invest in an experienced franchise attorney and / or franchise consultant. Avoid sharing your plans with friends, relatives, and other ‘yes’ people who don’t understand the risks involved.
3. Chill out - Be patient and wait for the right opportunity. If you are pressured to make a quick decision, walk away.
4. Leave your checkbook at home – You’re most vulnerable to an emotional appeal at that first meeting with the franchisor. Never hand over money before you’ve done your due diligence.
5. Be pessimistic – Take off the rose-colored glasses and run a financial model that cuts the sales projections in half, doubles the expenses, and triples the length of time until you expect to be profitable.
6. Have an exit strategy – Like a pre-nup, it seems counterintuitive. But you need to know you won’t be stuck if you make the wrong choice.
7. There are other fish in the sea – Before you fall in love with the first franchise you see, get information packages from all the other franchisors in the industry and make an objective comparison.
8. Beyond the honeymoon – Sure, you’re excited now, but can you really see yourself doing this 20 years from now?
9. Buy a proven system or one where the upside is huge Be careful with a franchise with only one unit or a very short business history. Don’t be tempted by an invitation to “get in on the ground floor”... unless the business concept really makes sense.

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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.


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