So you’re thinking about buying a franchise…
Business ownership is a fun, exciting and scary idea. The idea of self-employment and being in control of your future has its ups and downs. It is not for everyone, but, those individuals who find it to be a good fit love it.
Franchise or independent
The first step you need to take on the road to becoming an entrepreneur is deciding whether you want to be independent or buy a franchise. Be honest with yourself.
- Are you the type of person who wants total control? Do you want the freedom to start your business from scratch, choosing every detail yourself? If this is the case, starting or purchasing an independent business may work for you.
- Do you want to follow a proven system and processes that has been used by others successfully? Buying a franchise allows you to forgo re-inventing the wheel.
Narrowing it down
Once you’ve decided that the franchise business is right for you, you need to decide which franchise is right for you. Before jumping on the computer and searching all the 3,500 franchises out there, you need to rule some things out. Start the franchise exploration process by looking at what business skills you bring to the table.
- Are you great at sales? Marketing? Or are you better at operations and/or management?
- What are you passionate about? It is really hard to work everyday doing something you aren’t fully behind (isn’t that why you want to be in charge and call the shots anyway?). For example, some people like to go out and make sales calls because they have fun traveling around talking to many people. Others find owning a place customers come to, such as a boutique or restaurant much more exciting.
Identify the businesses you aren’t passionate about and rule them out early in the process.
Your support team
Something important to consider when making the decision to own a business or buy a franchise is your support team. Do you have a family being affected by this decision? Don’t overlook that deciding to start a business – franchise business or not, needs to be a family decision. Family members must understand that there will be serious demands on your time, and that they’ll need to be supportive of your decision. It is hard to come home after a hard day working and hear “I told you not to do this” instead of “we knew this was going to be hard, how can I help?”. And, let’s not forget the money issue. It’s possible they’ll be nervous about the amount of money you’re thinking of investing in the franchise business.
Understand your financial strength and ability to start up a business. You will need to determine your net worth and how much cash you have to put into the business. This will determine the cost range of franchises you should look at. Also, really evaluate how much you want to spend and how much you want to keep for backup. You will need some cash to live on while your business starts up.
initial Due Diligence
As you search for franchises and find opportunities that interest you, do your due diligence.
- Reach out to the franchise company representative
- Obtain all of the company’s marketing materials including flyers and brochures. Review social media including Facebook, YouTube and LinkedIn posts made both by the company or other people about the brand you are interested in.
- Fill out their application to get the Franchise Disclosure Document (FDD) and any other application materials. The FDD is the required legal document that will be sent to you by the franchise company. Write down any questions you have and ask the franchise company representative to clarify.
More Due Diligence
Call the current franchise owners and ask questions. They have already done the due diligence you are doing now and joined the system. Ask a lot of questions to find out the why, what, how, where and would they do it again. Visit locations if you can.
Visit the support center
Meet the people you will be working with and supporting you. This can be done virtually or in person at Meet the Team or Discovery Day meetings. Pay attention to the organization and skillset of individuals at the company. You are looking for the right fit for you and need to feel comfortable that they are good at what they do and have the systems and processes to support you. And don’t forget culture! You want this to be a mutual fit. Pay attention to the values of the franchisor to see if they align with your own. The franchise company should also want their people to assess you for the same reasons. Everyone should be looking for a mutual good fit.
If you approve the franchise, they approve you, and it’s a good fit, the next step is signing the franchise agreement. There are good franchise attorneys out there to help you through this process. Most franchise systems don’t make changes to the franchise agreement, but seeking help from an outside professional will help make sure you fully understand the agreements before buying a franchise.
Sign the franchise agreement, pay the franchise fee and start building your empire!