What follows are my top 10 tips for buying a franchise this year. (2017) Please make sure you bookmark this article right now, so you can instantly refer back to it as you search for the right franchise to buy.
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 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 2017
1. Start the franchise exploration process by looking at what the 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?
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. 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.
The system includes rules…lots of them-along with certain procedures you must follow as 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?
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. Make sure you have the complete support of your family.
A point often overlooked is 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. 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.
Suggestion: Read my article, Buying a Franchise-Fighting About 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 be asking you for it.
5. When you find 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 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. 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, you 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 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, 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. You need to do a gut check.
In short, you’ve gathered your 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. You need to see if things “feel” right.
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.
Another 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 coaches.” The tip: Make sure you understand what a franchise coach is and does.
Sooner or later, as you search for a franchise business opportunity, you’re going to get contacted by a franchise coach, consultant, or broker.
It’s important to realize that a coach, consultant or broker all do the same thing. They just use different names.
What they do:
They all offer to “Help you find the right franchise“- and they offer to do so free of charge. But why? Why would someone work for you for free?
The answer: Because if they successfully match you to a franchise they’re contracted with, they’ll get paid around $20,000.
Learn more about franchise coaches here, and how they really work.