First off, I hope you won’t be too disappointed if I don’t use the word “Thou” in this post about the most important part of the franchise purchasing process.
Secondly, I realize that the word, “Commandment” is a powerful one. As in “I command you to…”
That said, if you’re uncomfortable being told what to do (by someone who knows way more about how to do powerful franchise research than you do), you’re more than welcome to substitute a kinder, gentler word as you read through my 10 Commandments. (My 10 franchise research tips)
For example, you can use “suggest.” Or “encourage.”
But know this: the ramifications of doing it like that will be huge.
To put another way, if you want to reduce your financial risk, you must do the following 10 things when researching franchise opportunities. Or face the consequences, which includes losing your money, a potential hit on your credit score, and the embarrassment you’ll feel when you go out of business.
The 10 Commandments of Franchise Research
I encourage you to read every Commandment, so you can begin researching franchise opportunities the right way.
- Never attempt to research franchise opportunities until you learn exactly how to do it
Bluntly, if you’ve never been taught how to do first-rate franchise opportunity research, you don’t know how to do it.
“Joel, I’m sure I’ll be able to figure out how to do franchise research. I’ve done research on a lot of things in my life.”
Nope. That doesn’t fly. You don’t know how to do this. And it doesn’t matter how smart you are.
“The saying goes, ‘if you fail to prepare, prepare to fail’, but if you are preparing for something you have never done before, no matter what your other experience might be, often the most efficient and effective method of preparation begins with relying on experts. This saves you time, money and provides wise counsel.”
– Carol Roth, Creator of the Future File Legacy Planning System, “Recovering” Investment Banker and New York Times Bestselling Author.
- Do not research franchise opportunities quickly
If you end up purchasing a franchise, it will end up being one the largest investments you’ll ever make. That’s why you need to make sure you do your research slowly and methodically.
Why does this matter?
Because if you rush through your research, I guarantee you’ll miss something important.
Find Out What Separates This One From All The Others
Remember, once you sign a franchise agreement, there’s no going back. You’re committing 10 years (on average) of your life to the franchise business opportunity. You need to make sure it’s the right one for you…and for your area of the country.
- Always research competitors
Don’t put all your eggs in one basket.
That means that even if you’re in love with a particular franchise opportunity, make sure you scope out their competitors.
In this case, that means to contact at least one competitor, request franchise information from them, and go through their process. You never know…they could end up being a better, more profitable franchise business for you. And besides, what if your first choice in a franchise turns out to be not such a good choice after all.
- Create Google alerts
Whenever you’re interested in a specific franchise opportunity, immediately create a Google alert. That way, whenever the franchise is mentioned online, you’ll know.
Google alerts generally include everything from press releases, to rating and reviews, along with news items about the brand. Here’s how to set one up.
For example, if you’re interested in Firehouse Subs, and you create a Google alert for “Firehouse Subs Franchise,” one day you may get an alert in your inbox with a subject line that reads, “North Carolina businessman signs 10-store franchise agreement for Firehouse Subs.”
Of course you may end up getting a Google alert about a franchise lawsuit…but let’s not go there.
- Be nice to Franchise Development Representatives
Franchise Development Representatives have a job to do, and that job is to sell franchises. And every time they sell a franchise they get paid a commission.
In a nutshell, everything they do is an attempt to lead franchise candidates (you) closer to a deal.*
*In this case, a “deal” is a signed franchise agreement along with a check for the upfront Franchise Fee.
So, knowing this…why would you want to be nice to them? After all, in their minds, all you are is just another “candidate.”
Answer: Because if they don’t like you, you won’t be able to buy the franchise opportunity they represent.
Now, you don’t have to kiss their butts.
If they aren’t cooperating the way you feel they should be, if they aren’t answering your research questions, call them on it. Just do it nicely.
Because when it’s all said and done, they want you to buy a franchise.
Recommended read: Working with Franchise Salespeople
- Do not worship false franchise gurus
Your franchise research, especially the online variety, may lead you to a few dark places. One of them: Amazon.
For instance, suppose that you’re researching franchise opportunities, and you type “hot franchises” or “amazing franchise opportunities” into the Google search bar…just to see if you can maybe get lucky and find one or two franchises that look like winners.
Then-as luck would have it, you learn that there’s an entire book about “amazing” franchise opportunities. So you buy it, and you’re one excited person. Heck, you may find an amazing franchise to own. And the book was only $7. You’ve got nothing to lose.
You better read this. It’s about a book and a franchise guru gone bad.
One more thing: If someone calls themselves a “franchise consultant,” it doesn’t mean that they are a franchise guru. So check their credentials.
- You must not fall for franchise marketing buzzwords
Please…I beg of you, don’t go back in time…back (in the 80’s) when Entrepreneur Magazine®, and a couple of “Money-Making Business Opportunities” rags were the only ways to find out about franchises for sale…back when franchises were more of a “thing.” Back when more and more people were becoming interested in being their own boss.
Two Important Things to Know About That Time
A. The government wasn’t very focused on the franchise industry
B. Marketers were
“B” is one of the reasons that phrases like “Business in a Box” and words like “turnkey” started to become commonplace. And they’re still being used today.
Now, to be sure, they’re great words.
For example, who wouldn’t want to own a “turnkey” business?
In like manner, wouldn’t you want to buy a “Business in a Box?”
But the thing is, “turnkey” businesses don’t exist.
Same goes for a “Business in a Box.”
But the words do. Still.
Important Franchise Research Tip: Click the Book Cover!
- Do not visit local franchisees
Sometimes, your best intentions can lead to problems. Case in point: Visits to local franchise businesses for research purposes.
For instance, if you’re interested in learning more about The UPS Store®, in your mind, it makes total sense to stop into one of their local stores for a little look-see.
Let me rephrase that.
Do not visit a local franchise owner until it’s the appropriate time.
As in, not until you have a deep understanding of their business model, have had extensive conversations with the Franchise Development Representative, and have talked with several franchisees.
The reason: you’ll look like foolish. You’ll come across as an amateur who’s “just snooping around.”
There’s another potential problem with visiting a local franchisee too early in the process.
You may get her paranoid. She may start thinking that another franchisee is moving in, and that this franchisee could take some of her customers. (Even if it’s not even remotely true)
The bottom line?
Don’t invent your own process. Doing so may have some unintended consequences.
- Call at least 10-15 existing franchisees
Without exception, the best resource to get answers to your most burning questions about the franchise opportunities you’re looking at are the franchisees. After all, they’ve already invested their own money in the franchise, and know, first-hand, how things are going with the brand and their own businesses.
As you do your franchise research, there’s a slight possibility you’ll run into people who don’t think you should talk to existing franchisees. That’s because they don’t feel they can be trusted to tell the truth. Why…I don’t know. It’s really bizarre. A total conspiracy theory. Maybe it’s something in their water.
Tip: Ignore that ridiculous advice. Call franchisees. If you approach them correctly, and ask them good questions, you’ll get the answers you need to make a smart choice in a franchise to own.
- Do not visit franchise headquarters
To be exact, do not visit franchise headquarters unless you’re serious about buying that franchise. And what do I mean by “serious?”
Serious franchise buyers:
- Have spent a good deal of time going over the franchise opportunity with the franchise development director
- Have started writing their franchise business plan
- Have approached a lender or two
- Have talked to a lot of existing franchisees
- Have started looking for a competent franchise lawyer
- Have had this important discussion
- Are 90% sure they’ll go forward with the opportunity
The reason you need to be in “serious” mode is because a visit to headquarters is a big deal.
As a matter of fact, it’s so big, the franchise development representative who invited you is already thinking of ways he’ll be spending his commission check.
The check he received because you bought the franchise he represents.
But here’s the good news.
If you are serious about a particular franchise, and you do end up traveling to headquarters for an in-person visit, a lot of good things can happen.
In a nutshell, you’ll come face-to-face with everyone you’ll be interacting with during the course of your franchise agreement. You’ll be able to see for yourself if they’re talented and professional. If they’re the real deal. And you’ll be able to ask a lot of questions.
Use The Top 10 Research Tips I Shared
If you want to make sure you’re buying a franchise you can make excellent money owning, offers an outstanding opportunity to build equity so you can sell your business at a tidy profit and provides the type of financial security you’ve always dreamed of having, you need to do great franchise research.
That said, The 10 Commandments of Franchise Research serves as a good starting point for anyone looking to buy a franchise someday. But there’s more to learn. A lot more.
On that note, wouldn’t it be great if there was a book, or maybe even a guide of some type, that showed you exactly how to research franchises, in an easy, step-by-step way?
Well, there actually is. And I wrote it. You can check it out here