10 Steps to Choosing the Right Franchise
Owning your own business is the most common definition of the American Dream. There’s more than one way to go about entrepreneurship, but buying a franchise removes a lot of the risk that typically comes with starting from nothing. Proven business models, training and marketing support are just a few of the built-in benefits to franchising.
If you’re in the market for a franchise, it’s important to make sure you’re choosing a franchise that suits you and your lifestyle. Follow the 10 steps listed below, and you’ll be well on your way to finding the right fit and living the dream.
Start asking yourself the hard questions. Why do you want to own a business? Why a franchise? Make a list of your hopes and dreams (also known as your “why”) along with your fears so you can evaluate opportunities against this list. Some other things to consider:
- Are you willing to work nights and weekends or are you looking for an opportunity with typical business hours?
- Are you a self-starter? Are you willing to adapt to an already established business model?
- What do you want your brand to say about you?
- What are you most passionate about?
- Once you understand your strengths, weaknesses, passions and values, you’ll be able to instantly know whether or not a franchise opportunity is a good fit for you.
2. Secure Financing
Get intimate with your finances. You’ll need to have a firm grasp to be able to determine what level of investment you are willing, and able, to make. For example:
- What’s your debt to income ratio like?
- Do you have liquid assets? What ‘s available to you now?
- How much are you able to invest?
- Are you willing to take some cash out your retirement, or is a small business loan a better option?
The financial climate is constantly changing, so be sure to start this process early, as it can look very different from what it looked like six months ago. If you have a professional financial advisor, you may want to talk through some of these with him/her.
3. Research Industry Categories
Read through a list of franchise opportunity categories to get an idea of what aligns with everything you identified in Steps 1 and 2. If it doesn’t align, it’s not the industry for you.
4. Find Potential Concepts
Once you’ve narrowed down your list of categories, start thinking about each individual franchise opportunity in more detail. You can take this quiz to get a jump start on your list.
As you look at specific concepts, you should be thinking about the ability for the specific business to thrive in your area, along with the following:
- Does it show potential for real growth?
- Are there territories available in your area?
- What’s the corporate support like?
- Can you see yourself wearing that branded polo?
Make sure the answers to these questions align with the answers to the questions we asked in Steps 1 and 2.
5. Submit Request for Consideration/Request More Information
Now that you have your small list of potential franchises, contact them and request more information. Read through their websites, watch their videos, submit your application and talk to their Franchise Development Representatives. During this process, make sure all the information you learn still aligns with everything you discovered in Steps 1 and 2. Be selective, but open minded.
6. Review FDD
At this stage the franchise will send you their Franchise Disclosure Document (FDD). This document, required by the Federal Trade Commission (FTC), lays out their business model, potential fees, what the franchisor will and won’t provide, a history of the executives, any litigation the company has experienced, the names and contact information of current franchisees and a copy of the franchise agreement.
It’s important to read through it carefully and make sure to ask any additional questions that may come up before moving on to the next step. Read our blog about how to navigate your way through the FDD.
7. Validation Calls
The best way to learn the ins and outs of a franchise system is to talk to their current franchisees. Call a handful of franchisees listed in the FDD and ask them about their business, their day to day lives, their customers, how they like working with the corporate team, what they think of the brand. This is a great way to get some insight into how well a franchisor supports its franchisees, how effective their marketing plans are, and whether the startup costs and sales projections are realistic.
8. Attend a Discovery Day
One of the most important parts of this mutual evaluation process, the Discovery Day, also known as Meet The Team Day, is a scheduled visit to the franchisor’s headquarters. Ask your final questions, meet the support team, and get a feel for the company culture. They’ll be evaluating you too, so it’s important that both sides end the day feeling comfortable and confident about partnering together.
9. Make Your Decision
After following these steps, carefully reviewing all the information provided and really checking in with yourself, it’s time to make your final decision.
Does this opportunity align with your financial resources? Can it provide you with the lifestyle you want? Does it leverage your skills and experience? Do other franchisees feel generally happy and supported? Does it come with an experienced, optimistic team of people who are dedicated to seeing you succeed?
10. Sign Franchise Agreement
Did you say yes to all of the above? Well, then it sounds like you should sign that Franchisee Agreement and head to training.
You did it! You chose the perfect franchise for you. Welcome to the American Dream.