Opinions expressed by Entrepreneur contributors are their own.
You’ve decided to take your career to the next level by investing in a franchise. Now what? With more than 800,000 franchise establishments in the United States, how do you find the one that’s right for you?
It’s a mix of objective performance indicators and gut-level instinct, in an ongoing balance until you purchase. First, list your wants and needs, your budget and the things you are good at and enjoy versus those you are not good at and hate doing. Friends and family are good sources for these insights; they know you best so they can tell you whether they think you’d be good at it.
You don’t have to do all of this alone; nor should you. Plan to have a team behind you: a broker if you’re buying an existing location, with a lawyer and an accountant when you’re in the final stages.
Once you’ve decided to buy, here are three steps for researching the perfect franchise for you.
Start with yourself
You will be one of your most critical resources when researching the franchise. Before you get to the financial or logistical aspects, you must be sure you’ve chosen the best industry and company for you – and if franchising itself is right for you.
Ask yourself the following questions:
- Why do I want to own a franchise? Can I really see myself doing this? If you’re in this to get rich quick, better look elsewhere. Prosperity should be your goal (who goes into business to not make money?), but you should know it will take a lot of hard work to get there. If your goal is to have more control of your career by running your own business, consider if you’re ready to be the boss in difficult times, when sales are slow, or the team isn’t performing.
- Do I know enough about this industry to buy into it? You don’t necessarily have to have run a restaurant, sign company or any business in the past to succeed in a franchise, but the more you know about the company and industry you’re eying, the more successful your investment will be. And the less experienced or knowledgeable you are, the more critical it will be to identify people you can turn to for answers you don’t have.
Research the company and its industry
You have a wide variety of resources: Publications like Entrepreneur‘s Franchise 500 can give you a sense of the industry as a whole. The brand’s website can help you analyze its products/services, history, mission and values; look at its social media and online reviews for customer feedback. Ask the franchise to connect you with a franchisee. Meet with a local representative and visit existing locations of the franchise and its competitors. Also, consider:
- Does the franchise have a history of success and strategic growth? A franchise that isn’t adding locations and attracting new franchisees is just another business with multiple venues. Check out the market for the product or service, including growth opportunities. If the franchise brand doesn’t have a clear plan for where and where not to locate new franchise locations, it may not be the best choice for you. The brand should also be willing to share backup materials for its earnings claims.
- Does the company have resources for training, setup and ongoing support? You should expect detailed help choosing and setting up your location, thorough training for your team and networking opportunities to learn from vendors and fellow franchisees. Initial training should last one to two weeks, followed by two to three weeks of set-up and periodic on-site visits for setting up technology and marketing.
- Discovery Day is an exploration day for prospective franchisees to learn more about the brand. Prepare for it by getting the agenda and learning whom you’ll be meeting with. Prepare three to five questions for each person. Your goal should be to get a good feel for the company and its culture.
- Franchisee feedback. The brand should be willing to let you speak to an owner without a corporate “chaperone.” Ask the owner about their experience with the brand. Has the company provided adequate training and support? Does it seem to care about its franchisees? And the bottom line: Would they do it again?
Be willing to walk away
Throughout your research, be alert to red flags, such as a lack of success in a flagship location, failure to provide manuals and reluctance to have a “discovery day.” You should be able to visit other franchisees on your own, outside the presence of a company representative.
Researching a franchise requires willingness to dive deep into the company you’re looking at and to keep asking questions until you understand and can accept the answers. You’ll be sinking a significant amount of your money, time and heart into this investment, so don’t rush into it – and don’t be afraid to walk away. It’s OK to drop a prospect that doesn’t look or feel right if you do so at the brand’s established “point of no return.” At United Franchise Group, we prepare for that possibility by making our deposit fully refundable before final signing, if the applicant isn’t comfortable with the marketing, location or lease before they commit to ownership. The last thing we want is a franchisee in a business they don’t like.
Of all the factors to look for as you research, the overarching one should be the franchise’s support and respect for you. You should get a sense that the brand is out for more than a cut of your revenue but is there to help you succeed. While you’re investing in the franchise, the franchise should be investing in you — setting you up for success, which creates their success.
