Franchise Money Maker

Buying a franchise and going into business for yourself is a life altering decision. This article along with the companion Podcast will help you avoid mistakes when making the decision regarding which franchise to purchase.

First of all you must do thorough research so you don’t end up buying the wrong franchise. There are very definite steps that need to be taken I order to avoid some very common mistakes. Start by evaluating your self, your likes, dislikes, your background, prior career, how much you can afford. These questions need to be answered first. They have nothing to do with any franchise company and everything to do with you, and after all being in your own business is about you.

Next take the path of least resistance by eliminating the franchise concepts and opportunities that don’t fit your criteria. Some concepts are so wrong for you that it’s easy to cross them off the list.

When you get to the opportunities that fit your personal criteria, you’ll know that these are the companies to investigate further, what’s called “due diligence.”

So let review the steps you need to take in the self-evaluation process and then how to investigate and evaluate the franchise company that is right for you.

STEP 1
Remember before you begin looking at franchise concepts, start by evaluating yourself, your likes, dislikes, your background, prior career, how much you can afford.– The real you.

1. Consider your past jobs, current career and determine what you liked best and least about them.
2. Make a list of your strengths and weaknesses.
3. Do you see yourself managing others or do you prefer to work alone?
4. What experience, skills and interests do you have?
5. Where do you want to work?
6. Are you willing to relocate?
7. How much money can you invest and how much would you like to make?
8. How do you feel about selling and the sales process?
9. How many hours are you willing to work while the business gets off the ground?
10. What sacrifices are you willing to make to your current life style? What expectations do you have before and after the business is well established?

Be honest, write your list, and focus on the companies that match your needs and will meet your goals.

STEP 2
Stay focused on your personal criteria but keep an open mind. Keep all your options open when considering a franchise.

An unprepared person may approach the process by thinking, “Well, I love sandwiches so I’ll buy a sandwich shop. Only to find out after spending days or weeks of research on Subway or Panera Bread and others, that the required capital is too high, the territory is not available, you’ll have to give up weekends if you want to own a food franchise.

Another ineffective way to start your research is to edit your criteria list down so narrow that you lock yourself in to one or two concepts. If you think, “I’ll only look at auto repair shops or gas station franchises,” you may miss finding the concept that would match perfectly with your needs.

With so many franchise concepts available, keeping an open mind is the best strategy you can use to perhaps get on the ground floor of that new, hot concept or to find something that will really take off in your market.

STEP 3
Let’s assume you now have narrowed your search down to the franchise concepts you believe will best match your criteria. What do you do next?

You will want to thoroughly view their web site. Contact the franchisors and request information about their company. You will most likely need to give them some upfront information in order for the company to take you seriously and send you information. Don’t be shy; leave them all your contact information so they can get back to you for that first & all important telephone interview and qualifying conversation. Review all the initial information, brochures and any videos they send you. Within a few days you will probably get a call from someone in the franchise department who will ask you several questions in order to determine your qualifications, your interest and advise you if the territory you seek is available.

Remember this is a two way street. They will be investigating you the same way you are investigating them. Most franchisors take the position that they “award” you a franchise, not that you are a buyer and can “get in” simply because you can write a check. I’ve always told my clients, if a franchise salesperson doesn’t give you a thorough and professional telephone interview, stay away. If the franchisor values its brand and system they will most likely ask you more questions then you may ask them. Don’t be discouraged. This is a good sign, after all they have their criteria also and they want a good fit, just like you. For the franchise relationship to work both sides need to be happy with the decision.

Ask yourself a few questions at this point. Have your initial questions and concerns been answered to your satisfaction? Was the call courteous and professional? Was the caller friendly and knowledgeable? Are the materials up-to-date?

How the process is handled at this point may be an indication of how you will be serviced once you are awarded the franchise and begin your business relationship with the franchisor.

STEP 4

Fill out and submit your application. Pay close attention to the financial informational they ask for. If you are serious, be prepared to disclose everything. Some applicants try to hide past credit problems or feel offended and won’t give proper financial information. THIS IS A BIG MISTAKE. If you’re serious, be honest, candid and through. After all, you expect the same from the franchisor. Many franchisors will not schedule a discovery day or send you their UFOC (Uniform Franchise Offering Circular), a document every franchise in the United States is required to provide, without complete and accurate information from you. The UFOC is full of information about the franchise and it clearly explains the responsibilities of the franchisee (you) and the franchisor.

Your next step is to schedule your discovery day at the franchisors office. In some cases the franchisor may send your their UFOC in advance, others will give it to you at the first personal meeting to discuss the franchisee. In either event you are required to sign a receipt acknowledging that you received the UFOC on a particular day. Once again, if you are reluctant to sign the receipt, you should consider the process over. The UFOC receipt is required by the franchisor and most will not circumvent legal compliance. If they send you the UFOC in advance, read it. From this document you will learn the history of the company, the training and marketing programs, and what costs, royalties and fees you will be required to pay. Your UFOC review and understanding is a very important part of the research process. Every UFOC is structured the same way covering 23 items of disclosure required by the FTC (Federal Trade Commission). By paying attention to what you discover in a company’s UFOC, you can eliminate franchise companies that just don’t measure up.

Many companies may also do a credit and background check before they proceed. Many franchisors get hundreds of inquires a year and they want to spend time with applicants who are ready, willing and able.

The UFOC document will become the basis for your questions. Make a list of questions and bring it with you to your discovery day meeting. Ask plenty of questions.

STEP 5
I consider what I am about to tell you the most important step in the entire process; CALL EXISTING FRANCHISEES!

Operating franchisees are your best source of information for investigating what really happens in day-to-day grind of the business. You can ask about their relationship with the franchisor, the service the company provides, what they like and dislike about the business. If you build some rapport with the franchisee you may even get a feel for the type of earnings a franchise makes.

Speak with several franchisees because you will most likely get a variety of opinions. Don’t feel shy to discuss your findings with the franchisor. You don’t need to name the franchisees (if any) that gave you negative comments, but you should address the franchisor for an explanation. Do not make a decision without completing this step. I urge you!

STEP 6

Now that you’ve narrowed it down and selected a company that you believe is a good fit, it’s time for an attorney to review the franchise contracts, the UFOC and any other paperwork you will be asked to sign.

I suggest you engage a Franchise Attorney. You can find attorneys specialized in this area on the internet or contact the IFA (International Franchise Association) they may be able to point you towards a law firm that can advise you on the paperwork.

Step 7

Now, it’s time to make the final decision, execute the franchise agreement and begin the process of developing your franchise. I remind clients; they are in business the minute they sign the franchise document. The set-up process to opening your business to the public is part of the business. So remember you’re in business when you sign the agreement, not when you open your store.

Simply put, you’re decision will be filled with anticipation, excitement and a healthy fear. Those are very normal feelings, if you’re not feeling any emotion about starting a business, perhaps this is not for you.

However, if you’ve done your “due diligence” and followed these simple steps, you should be very comfortable with your decision.

Quick review:

1. Evaluate yourself
2. Keep an open mind; find some companies that meet your criteria.
3. Contact the franchisor and request information
4. Review UFOC/meet Franchisor
5. Talk with existing franchisees
6. Legal review of the Franchise Agreement
7. Make your decision, you’re in business!