EVERYTHING FRANCHISING

5 Steps to Start Finding the Right Franchise

You’ll want to follow a step-by-step plan to buying the right franchise for you. But you can’t run a race if you can’t find the starting line, and the path to addressing all these questions begins with the most fundamental question of all: How do I get started choosing the right franchise? The good news is that if you’ve done some initial research and believe that franchising could be the right approach for achieving your financial and personal goals, there are some proven steps you can follow to ensure you make an informed and intelligent decision.

EVERYTHING FRANCHISING

5 Steps to Start Finding the Right Franchise

You’ll want to follow a step-by-step plan to buying the right franchise for you. But you can’t run a race if you can’t find the starting line, and the path to addressing all these questions begins with the most fundamental question of all: How do I get started choosing the right franchise? The good news is that if you’ve done some initial research and believe that franchising could be the right approach for achieving your financial and personal goals, there are some proven steps you can follow to ensure you make an informed and intelligent decision.

Step 1: Set Your Priorities to Narrow Your Focus

One of the very first things you need to do as a prospective franchise buyer is to form a list of your top priorities. The list doesn’t have to be complete or final (chances are it’ll change at least somewhat as you learn more about the range of franchise opportunities available to you), but it should capture your top must-haves that’ll guide your initial franchise search. Your priority list will cover things like:

  • The type of business you’d like to be in (from general preferences like “I’d prefer to work with consumers” or “I’d like to be in a business to business franchise” to more specific criteria like “I want to invest in a pizza franchise” or “I want to get into a business consulting franchise”)
  • Whether you’re looking for a large, established industry (e.g., general fast food) or a smaller but faster-growing space (e.g., healthy and organic food franchises)
  • Whether you’re looking for a large, established brand (e.g., Subway, SERVPRO, or Chick-fil-A), or a rapidly growing, up-and-coming concept (e.g., Liquid Capital or Mr. Handyman)
  • How much training and ongoing support you’d like or expect to receive from your franchisor
  • Where you’d like to operate your franchise (most franchises only target certain states for expansion in a given year)
  • How much you can afford (or plan) to invest
  • Is the franchise or Industry congruent with your values

These are just a few common examples — there could be any number of different items that you would consider your top priorities because they reflect what’s most important to you, which is what conducting a personalized franchise search is all about.

Once you’ve pulled your priority list together, you’ll want to use that list as a filter to get an initial sense for the industries and individual franchises that could match your top priorities. This will help you narrow your area of research from thousands of franchise opportunities to perhaps a few dozen.

Take a master list of franchise opportunities (the Entrepreneur Franchise 500 published each January is the most comprehensive) and review it. To work through this process, you can start by browsing up and coming franchises, in the emerging sector, by industry using the FranLink System, a franchise search engine created by the Franchise Brokers Association. Simply Google FranLink.  You can filter by industry, check for location availability, and view the investment level for each concept. From here, you’ll develop your “hit list” of the dozen or two companies that best meet your priorities. Those are the franchises you’ll be exploring further.

Step 2: Explore Your Options at a Franchise Show

Once you’ve assembled your initial “franchise hit list” to explore further, it’s time to ask some questions. Going through a detailed Q&A with several dozen franchises can be time consuming and impractical, you can’t fly to every franchise’s HQ to meet with their corporate staff, so you need a way to meet with as many franchise representatives as possible in a short window of time. Attending one or more franchise shows or franchise expos is a great way to accomplish this task (you can Google search franchise shows listed to find one coming to your area).

Most franchise shows will feature anywhere from a few dozen to several hundred franchises gathered in a convention hall, with hundreds or even thousands of individuals just like you going from booth to booth to learn more about companies that pique their interest. You won’t learn everything there is to know about an interesting franchise at a franchise show, but you’ll learn enough to cross opportunities off of your list that don’t truly meet your criteria.

Step 3: Dig into the Details

After reviewing the profiles of franchises of interest online and speaking with their representatives at a franchise show, you should have narrowed your list to perhaps a half dozen or so. This is when it’s time to get down to the details! Get your hands on a copy of the Franchise Disclosure Document (FDD) of the franchises you’re most seriously considering. The FDD breaks down the details of the franchise offer, from a description of the business, to a breakdown of the expected costs of investing and running a location, to a discussion of the franchise’s key executives, to a list of any ongoing litigation that may raise red flags for you as a prospective investor in a franchise, among many other crucial details.

Step 4: Speak with Current and Former Franchisees

No amount of research can supplant the need to speak with current and former investors of a franchise for yourself. Take the questions you developed from reviewing the FDDs — questions about the business, questions about training and ongoing support, questions about the Item 19 (earnings claims) statements, questions about the expansion (or contraction) of the system — and get them all in front of you in one place.

Now it’s time to ask some tough questions of the world’s experts — the current and former franchisees themselves! Start emailing or calling the individuals found in the list of current and former franchisees you compiled in Step 3.

Approach a current or former franchisee (in person, by phone, or by email, in decreasing order of preference) in such a way that they’ll be willing (even enthusiastic) to speak with you.

The majority of franchisees will say yes, and you should go through your Q&A list with them. This is your golden opportunity; so feel free to go into details like:

  • Are you making as much money as you had anticipated and how long did it take your unit to become profitable (if it is)?”
  • “Are you happy with the training and support provided by the franchisor?”
  • “What kind of hours were you working in your first year in the business? In the second year?”
  • “What do you know now that you wish you knew before you invested?”
  • “What other franchises were you considering and why did you choose this franchise over the others?”

These questions may seem basic, but through the answers you receive you’ll gain quite a bit of insight.

Step 5: Visit Franchise Locations (and Competitors)

Even if you discover a great concept with seemingly happy franchisees, to get a really good understanding of what to expect you’ll want to visit active franchise locations or meet face-to-face with several current franchisees. Again, working with the list of franchise outlets that you compiled from the FDD in Step 3, you should map out a dozen or so people whose locations you can visit and/or with whom you can meet face to face. Remember not to limit yourself to just talking to franchisees directly related to your own franchise of interest – you’ll want to speak with competitors as well. The more variety you get, the better information you’ll have.

Bonus Step 6: Accept That You Can't Know Everything

The most important thing a potential franchisee can do to ensure success is to know everything they possibly can about the company they’re getting involved with before investing, but it’s unrealistic to expect that you could ever know everything. What you can do is take the right steps to make sure that you know the most important things (and that alone will require quite an effort). It may require months of research, from reviewing opportunities online to attending a franchise show to speaking with current and former franchisees, before you are ready to select and invest in your own franchise. There’s no question it’s a lot of work, but if you proceed diligently and intelligently through the steps outlined above, you’ll have started down the right path to a decision that could pay back your efforts for years to come.

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