Joel Libava
In this post, I’m going to give you my best franchise advice on buying a franchise you can be successful owning.
Tip: bookmark this page before you begin reading my top 10 tips for buying a franchise. Why?
Because these tips will help you increase your chances of success. After all, you want to lower your risk, right?
Franchise Advice: My Top Tips For Buying A Franchise
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 franchising tips below will help you learn about both.
That said, with 4,500+ 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 need to do is follow along, step-by-step.
Tip: make sure you’re following the latest trends in franchising. That way, if you spot a trend that makes sense, you may be able to jump on it before someone else in your local area does.
Top 10 Tips For Buying A Franchise
1. Start the franchise exploration process by looking at what the top business skills are that you bring to the table.
For example, are you great at sales? Marketing? Or are you better at operations and/or management?
Whatever the case, you need to personalize things as much as possible. Why?
Because you are unique. You may face some challenging situations that can be easily managed when discussing with Franchise Clues professionals, reading relevant literature, doing some research, and following prominent online newsletters for the latest updates. This will provide valuable information, guiding you towards options that best fit your skill set.
And remember to match your unique skills and even your dominant personal traits to franchise opportunities that can best utilize them.
2. Make certain you’re comfortable using someone else’s systems and procedures.
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.
My point?
Franchises have lots of rules and processes you need to follow when you’re a franchisee.
With that in mind, how are you with rules? Do you follow them? Will you follow them as a franchisee? Are you sure?
I hope so.
Note: You need to determine if you’re franchise ownership material.
Now read that again, because it’s some of the best franchise advice you’ll get.
To do that, take my Free Franchise Quiz (6,650 others have). Once you’re done with it, I’ll personally score it for you.
And just so you know, my quiz is 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.
More Advice And Tips For Buying A Franchise
3. Make sure you have the complete support of your family before you make a move on a franchise business.
A point often overlooked is that deciding to start a franchise business 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 part.
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 franchises you’re looking into, or how much they cost.
Suggestion: Read my article about the one thing no one talks about
And speaking of money…
4. Do a net worth statement before you even think of seriously looking into franchise opportunities.
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 require it, so they can determine if you’re financially qualified.
Use My Free Net Worth Calculator
5. When you find franchise opportunities that interest you, talk to as many franchise owners as possible. And make sure you ask them lots of questions.
In addition, make sure you spend a day with one or two existing franchisees.
For more franchise advice, read, Franchise Research Tip: Spend A Day With A Franchisee, for useful tips on how to make this day super-valuable for you.
6. Don’t rush through the research process. Be thorough, and talk to both happy and unhappy franchisees.
After you talk with franchisees, discuss what you learned with the franchise company’s sales representative. See how they react to your questions, and judge their responses to what you’ve heard from franchise owners.
Bonus Franchise 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. Grab this business plan software!
Important Tips For Buying A Franchise: The FDD
7. You need to read through the entire Franchise Disclosure Document (FDD). Then you need to read it again.
In a nutshell, 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.
Now, don’t freak yourself out over some of the things you may see in the FDD.
In other words, leave the things you’re most concerned about to the franchise attorney* you hire.
*You’re going to need to hire a franchise attorney. It’s money well-spend, believe me. So read this article about the importance of hiring one.
Bonus Franchising Tip: You need to start the process of applying for a franchise loan-a small business loan.
Here’s a way to get money for your franchise business.
Franchise Advice: You Must Visit Franchise Headquarters
8. When you’ve narrowed your search down to one franchise opportunity, you’ll need to invest 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 executives and support team you’ll be partnering with in person.
That’s right: franchising is a partnership…maybe not in the legal sense, but you are partners.
Here’s what to expect at Discovery Day.
When You Get Back Home
9. When you get back from your headquarters visit, 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 will point out the things you need to know and share anything, you may have missed.
Bonus Tip: you should also hire a CPA (Certified Public Accountant) to help you with the numbers.
And don’t forget to set up your company properly.
10. You need to do a gut check.
In short, now that you’ve gathered your data, it’s gut-check time.
You’ve kept family members in the loop.
You’ve contacted-and in some cases, met franchisees in person.
You’ve visited company headquarters for your Discovery Day.
You’ve talked with a franchise attorney.
You’ve written your franchise business plan.
So now it’s decision time.
DD-Decision Day is what I like to call it. Ask yourself this:
Does the data and the numbers add up?
Does the franchise opportunity “feel” right?
Is your family behind you?
My Advice Moving Forward
If, after doing great research, the franchise you’ve been thinking of buying feels like “The One,” move forward.
If something doesn’t feel right…I’m not referring to the anxiety you’re probably having…after all, this is a big decision, don’t do it. Period. There will be other opportunities.
Bonus Franchise Tip!
I’d like to offer you one more tip-and it’s an important one. This one has to do with franchise consultants.
That’s because sooner or later, as you search for a franchise business opportunity, you’re going to get contacted by a franchise consultant.
A consultant is going to offer to “Help you find the right franchise“- and they’ll offer that help for free. For free, Joel?
Yep.
They’ll work with you for free, because they’re “matchmakers.”
In other words, their goal is to “match” you to one of the franchises they’re contracted with.
Because a successful match means a $20,000 paycheck for them.
Or more!
Must-read: The Ultimate Guide To Franchise Consultants
Now I’m not saying it’s bad to work with a franchising consultant.
As long as you understand that you are not their client. The franchise companies are.
Finally, my wish for you is that you use my franchise advice and 10 tips for buying a franchise to find a franchise opportunity that’s affordable and profitable, so you can enjoy the fruits of being your own boss.
Go!
1. Start the franchise exploration process by looking at what the business skills are that you bring to the table.
2. Determine if you’re comfortable using someone else’s systems and procedures.
3. Make sure you have the complete support of your family before you make a move on a franchise business.
4. Do a net worth statement before you even think of seriously looking into franchise opportunities.
5. When you find franchise opportunities that interest you, talk to as many franchise owners as possible. And make sure you ask them lots of questions.
6. Don’t rush through 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.
7. Commit to reading through the entire Franchise Disclosure Document (FDD). Then you need to read it again.
8. When you have narrowed your search down to one franchise opportunity, you need to invest a little money to visit the franchise company’s headquarters.
9. When you get back from your headquarters visit, 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.
10. Do a gut check. Make sure you’re ready to become a franchise owner.
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