Franchise ownership is a commitment with a defined process and set of requirements.
Buying a business is more than likely one of the most substantial investments a person will make in their life. All of this is not to say the end result isn’t worth it; rather, investing in a franchise is an excellent way to escape the corporate grind and go into business for yourself, but not necessarily by yourself.
The franchise model is set up in a way that makes a proven, successful business replicable, provided the person signing the franchise agreement puts in the work and follows the necessary systems and processes. But with more than 4,000 franchise concepts on the market to choose from, the prospect of sifting through them all to find the right option can seem daunting.
So, where is an eager entrepreneur to start?
Dream of a business within your interests, there are many to consider.
Begin your search by considering your own interests.
Once it’s been decided that the franchise route is the best to take, the most logical place for an entrepreneur to start is with themselves. Opening a business is not only a significant monetary investment, it’s a significant time investment, too. As such, it’s important to go into an industry that engages your interests and passions. Start with what you like, then explore businesses that fit into that.
As an example, if you don’t care to know anything about cars, then owning a car repair franchise isn’t a good option to consider—no matter how lucrative the business is. Don’t lose sight of why you’re pursuing business ownership in the first place and give yourself the chance to make money doing something you enjoy.
Decide how much you can and want to invest.
Define your investment level.
With a rough idea of the type of business they’re looking to run in hand, a franchise prospect’s next step in the discovery process is narrowing down their investment appetite. Anyone considering buying a franchise must look at what they have available to invest and determine how much they’re willing to borrow in order to continue down the line, as many franchise brands have set minimum net worth and liquidity requirements.
A prospect can be as passionate about opening a hotel or restaurant franchise as anyone, but if they don’t have the operating capital necessary defined as required to open that business, it’s best to move on. With an accurate idea of how much they’re willing to spend, a prospect can now dive into the research phase with a more specific set of parameters in mind.
Determine whether an emerging or established concept suits you best.
When entering the phase of the discovery process where you’re beginning to compare specific brands to one another, it’s important to keep in mind that there’s a very big difference between a 10-unit burger franchise and McDonald’s. Ask yourself: Do you want to be a part of an emerging on an established brand?
There are pros and cons to both routes, so it ultimately comes down to personal preference. Established brands, for instance, have strong name recognition and refined processes in place, but may have limited market availability. Emerging brands, on the other hand, offer greater opportunity for influence and involvement, but also may come with growing pains.
Make contact with the brands you’ve narrowed your search down to.
Once a prospect has factored in the aforementioned criteria capable of helping narrow their search down to a handful of contending franchisors, it’s now time to make contact. Submit your information and enter into a conversation with the franchise development team. Between external independent research and the act of going through a franchise brand’s education process, candidates gain a deeper understanding of the concept they’re considering. Meet the team. Tour a location. Speak with current franchisees either by phone or in person – do it all.
When a prospect carries out this process for each of the brands they’re considering investing in, they gain a clear picture of each brand’s differentiators as it relates to the prospect’s own level of importance, helping them to make the most informed decision possible.
Look for the right connections – will you fit in with the team and the brand.
In these conversations, look for connection points.
Part of making the most informed decision possible is finding connection points with the brand or brands you’re considering. Signing a franchise agreement is typically a 10-year commitment, after all where shared goals and values lay the foundation for a healthy and successful relationship.
The franchisor should play into areas where, as a franchisee, you feel like you need more support. Look for franchisors that have demonstrated strength in the areas that fill your gaps, whether it be marketing, operations, or anything in between. If a franchise prospect isn’t as strong in the financial aspects of running a business, for instance, and a brand has great accounting systems, that could be a quality match.
Understand—and get comfortable with—a limited amount of control.
While the founder and corporate team members of the franchise you’re considering buying into won’t be in your business every day, they do serve as direction for the brand and make decisions for the system. As a franchisee, you’re not a key decision maker and will have to trust those at the top to act in your best interest—after all, being a great franchisee means following a defined model and adhering to best practices as determined by the franchisor. Make sure you understand and are aligned with the values the franchise brand you’re considering puts forward.
Hire franchise attorney and other professional advisors to review the FDD and the contract.
Review the FDD in detail with the help of an industry expert.
When a candidate arrives at the point in the discovery process where they’ve found and talked to a brand they’re particularly excited about, it’s time for a detailed review of said franchisor’s franchise disclosure document, or FDD. This legal document is both dense and binding, so it should be treated as such—meaning, it’s imperative for candidates to enlist the services of a specialized franchise attorney to review the document in detail with them so the candidate understands exactly what they are buying. This support is pivotal in determining whether a specific brand is the right fit for you, so dedicate the time and resources to going over the document with a fine-tooth comb to best understand and protect your investment.
If you spend the time going through the FDD with professional support and everything checks out, all it takes is a signature on the dotted line to step into your new entrepreneurial journey.
The final step to enter into the agreement.