How To Look For Franchise Opportunities
Investing in a franchise is a life altering experience for most
individuals and involves taking a risk with your money. In a recent
blog, I described the importance of
doing a profile before pursuing specific franchise
opportunities. This should include your strengths and weaknesses as
well as your financial profile. If you followed my advice you’ll be
in a better position to identify franchises that most closely match
your financial, personal and business profile.
Your next step in the franchise process is to find 3 to 5
franchises and perform a preliminary evaluation on these franchises.
You’ll want to do this before you spend money on franchise attorneys
and accountants. If you decide you want to utilize a franchise
broker, keep in mind that they represent a limited number of
franchises and they are paid by the franchisor when a candidate they
submit purchases a franchise. A large number of franchises are not
represented by brokers. Avoid being swayed by impressive franchise
websites with claims of easily achieved success.
There is no shortage of information when it comes to finding
franchises ranging from children’s services to home care. You can
find franchise opportunities on the Internet and in franchise
publications and directories. The key is to narrow those down to the
few that most closely fit your profile. This can be done by
following some tips listed below. When you’ve identified the
franchises that you’d like to pursue, your first question will be to
determine if your preferred territory is available. If the answer is
yes, then you’ll be ready to do a preliminary evaluation. If the
territory is not available, you have the option to contact the
franchisee that operates in the territory to see if they are
interested in selling.
Here are some steps you should follow:
Do a franchise comparison
You’ll need a copy of the Franchise
Disclosure Document that you can obtain from the franchisor after
you complete a franchise application, which is then approved. Set up
a spreadsheet or simple hand written table and insert the royalty,
initial franchise fee, ad fund fee, Item 19 disclosure, size of
territory and if it’s exclusive, the franchise term and renewal
term, number of franchises, and terminations for each franchise. If
a franchisor doesn't make a financial disclosure under item 19 be
wary of the reasons why, unless the franchise is a new start up.
When you’ve filled in the information you’ll have a side by side
comparison of the franchises that match your profile. Use this
information to zero in on the differences between each franchise.
Speak with Franchisees
Contact a minimum of five franchisees from each franchise to gain
feedback on their level of satisfaction with the franchise and
franchisor. Since this initial step is to help narrow down your
franchise choices, you may be speaking with more franchisees in the
future in order to do a more in-depth interview.
Search the Internet to see if any negative news comes up regarding a specific franchise. Enter the name of the franchise followed by terms like litigation, franchisee problems, complaints, etc. There is a great deal of information both positive and negative that can be gleaned from the Internet.
Additional Sources of Information
FranchiseGrade which grades franchise opportunities based upon actual franchisee surveys. This information can be useful for identifying franchise opportunities that are rated by their franchisees. In addition, don’t dismiss existing franchises which may be for sale. Known as franchise re-sales, these are sold by franchises for a number of reasons including; personal or family reasons, the desire to retire or for other reasons. Many business brokerage companies list both independent and franchise businesses for sale.
Finding the franchise opportunities that match your franchise profile is one of the first steps that should be taken when considering investing in a franchise. The best way to accomplish this without diving head first into a specific franchise is to do an initial review of the several franchises that match your profile. Remember, the more thorough and deliberate you are in evaluating each franchise the higher your probability for success.
Ed Teixeira is the President of FranchiseKnowHow.com and Chief Operating
Officer, FranchiseGrade.com. He is a former
franchise executive and franchisee. He can be contacted at 631-246-5782 or