Would you like some proven tips you can use if you decide to buy a franchise in 2016? Of course you would! Who wouldn’t want to get all the information they could about a topic they’re interested in?
When it comes to buying a franchise, there are several things you need to know before you begin the franchise discovery process. There are also a few things that you need to know about as you’re looking at franchise opportunities. My list of tips below will help you learn about both.
With 3,000+ different franchise opportunities to choose from, it’s important to be able to manage the process of looking for a franchise business that makes sense for you. The tips below can serve as your road map. All you have to do is follow along.
Top 10 Tips For Buying A Franchise In 2016
1. Start the franchise exploration process by looking at what the business skills are that you bring to the table.
Are you great at sales? Marketing? Or are you better at operations and/or management?
Personalize things as much as possible. You are unique. match your unique skills and even your dominant personal traits to franchise opportunities that can best utilize them.
Idea: Take my free introductory online franchise course.
2. Are you comfortable using someone else’s systems and procedures? I hope so.
Important: In franchising, you’re purchasing a license. This license gives you the right to use the franchisor’s proprietary business system. Don’t invest in a franchise, if you don’t intend to use the system.
The system includes rules…lots of them. And, certain procedures you must follow as a franchisee.
How are you with rules? Do you follow them? Will you follow them as a franchisee?
Are you sure?
Idea: Take the Free Franchise Quiz I developed several years ago. I’ll personally score it for you. It’s usually spot-on when it comes to determining if you’re right for franchising…if you’ll actually follow the rules.
Go here to take the quiz.
3. Do you have the complete support of your family?
Starting any type of 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. And, let’s not forget The Money. It’s possible* they’ll be nervous about losing the money you’re thinking of investing in the franchise business.
*Correction: They will be nervous! Especially since they don’t know half as much as you do about the franchise you’re thinking of buying.
You may want to read my article, Buying a Franchise-Fighting About Money
4. Before you even think of seriously looking into franchise opportunities, you need to do a net worth statement.
To do that, just subtract all your liabilities from your assets. The difference between the two is your net worth. And, not only do you need to do this for your own purposes…to set a budget for example, the franchise sales representatives you talk with will be asking you for it.
5. When you find some franchise opportunities that interest you, talk to as many franchise owners as possible.
Ask them lots of questions. Like this one. And, make sure you spend a day with one or two existing franchisees.
Read, Franchise Research Tip: Spend A Day With A Franchisee, for tips on how to make this day super-valuable for you.
6. Don’t rush the research process. Be thorough, and talk to both happy and unhappy franchisees. Be willing to discuss what you hear with the franchise company’s sales representative. See how they react to your questions.
Bonus Tip: This is a good time to start putting together your franchise business plan. Here’s why:
A. You’re going to want to put some financial projections together. Doing so will help you figure out your break-even point…and a lot more.
B. It’s almost impossible to get approved for a franchise loan without a business plan.
7. Read through the entire Franchise Disclosure Document (FDD). Then read it again. The FDD is the required legal document that will be sent to you by the franchise company electronically and/or via regular mail. Write questions down as you go, (you are free to mark the document up if you want) and be prepared to ask the questions you have to the franchise company representative.
Don’t freak yourself out over some of the things you may see in the FDD.
In other words, unless you happen to be a franchise attorney who’s buying a franchise, leave the things you’re most concerned about to the franchise attorney* you hire.
*You’re going to have to hire a franchise attorney. It’s money well-spend, believe me.
You need to read this article about the importance of hiring one.
Then, read this article I wrote for the U.S. Small Business Administration, so you can find out what’s included in the FDD.
Bonus Tip: You need to start the process of applying for a franchise loan-a small business loan.
8. When you have narrowed your search down to one franchise opportunity, plan on investing a little money to visit* the franchise company’s headquarters.
*There’s actually a name for this visit; Discovery Day. It’s the day you visit headquarters and meet the executive and support team in person. These people may end up becoming your business partners.
That’s right: Franchising is a partnership…maybe not in the legal sense, but you are partners.
Go here to find out what to expect at Discovery Day, and to find out when the right time for you to go to one.
9. When you get back from your headquarters visit, you need to go back through your notes. You’re going to want to see if there’s anything you missed. If not, it’s time for you to hire a franchise attorney to look over the FDD and the franchise agreement. The attorney should point out the things you need to know and point out what, if anything, you may have missed.
Bonus Tip: You should also hire a CPA (Certified Public Accountant) to help you with the numbers. A CPA can also help you decide on a business structure for your company, if you decide to move forward.
10. Gut check time. You’ve gathered data. You’ve kept family members in the loop. You’ve contacted-and in some cases, met franchisees. You’ve visited company headquarters for your Discovery Day. You’ve talked with a franchise attorney. You’ve written your franchise business plan. It’s decision time.
DD-Decision Day is what I like to call it. Ask yourself this:
Does the franchise opportunity “feel” right?
If, after doing great research, the franchise you’ve been thinking of buying feels like “The One,” move forward.
If something just doesn’t feel right…I’m not referring to the anxiety you’re probably having…this is a big decision, don’t do it. Period. There will be other opportunities.
Important! If You're About To Buy A Franchise, We Need To Talk
(Before You Send In Your Money & Sign Your Contract)
"I was pretty focused on a particular franchise opportunity when I reached out to Joel Libava. In the course of a 1-hour conversation, Joel was able to ask questions and provide direct advice to help clarify the process for me and help guide me through the next steps in my vetting process. He even put me in contact with other professionals who were able to help educate me further in my particular industry. The time and money were well spent."
-Brian Grayson, Cincinnati