Franchise opportunities provide potential business owners the chance to have a thriving business that is already an existing, popular brand. Statistically, franchise operators yield more profits than startup companies, especially since many startups fail within a couple years of being in business.
Because of the amount of franchise opportunities available, the first step to finding a franchise is to consider yourself and what your interests, strengths, and weaknesses are. When you can determine what you truly want in a franchise investment, you can find the right franchise niche for you.
Here are six steps to determining which franchise opportunity is right for you:
Once you have narrowed down your interests, do a bit of research on what franchises are available in that field. Check out websites like FranchiseExpo.com, as well as looking into the history of any interesting franchises to see their growth rate, growth potential, and financial stability.
Once you find a few franchises you’re interested in, it’s time to start the interview process. Usually the first interview is by phone with a sales representative, and it’s usually a process of you getting to know the company and vice versa. This is the time to disclose who you are, why you are successful, and what your ultimate business goals are.
Likewise, the franchise sales representative should be equally disclosing information about the company—what makes the franchise successful, why their brand is unique, and what characteristics make up a successful franchisee.
This next phase is the business review section where the franchisor discloses the Franchise Disclosure Document, which details in 23 points the franchise’s history, units, fees, and contract obligations, among other things. Do not skip reading through this document as it contains binding legal obligations you need to be aware of before signing any contract.
When looking at the FDD, ask yourself a few questions: Does the disclosure make sense? Do the terms and agreements seem reasonable? Did the company’s history seem reputable? Are you still interested in the company after reading through the terms? Is it still a good fit?
4. Franchisee Interviews
Make sure you take the time to speak with current franchisees of the company. They can provide you with invaluable information about the company and the work experience that you would have otherwise never known. It gives you an opportunity to see if the company is easy to work with and if they care about their franchisees.
5. Home Office Visit
Business rule 101: Never do business with people you have never met. Since franchising is a personal relationship between you and the parent company, make sure you have seen the corporate office, meet the executives, and ask them the tough questions. This gives you an opportunity to evaluate the franchisor’s leadership, ethics, and key management.
6. The Decision
Lastly, it’s decision time. From your extensive research, determine whether or not you and the franchisor would be a great fit.
When it comes to investing in something, you can never be too careful or research too much.