So you’re considering buying a franchise. You know your strengths, you know your weaknesses, your mentally prepared and you are confident to take the required steps to start a Franchise.
With proper research and preparation, you will be prepared to buy a franchise. AskMrFranchise.com is filled with loads of quality content that can provide you with a wealth of knowledge to take the next steps. You now have a list full of reasons why you should quit your job to run your own business and you have decided to franchise. Let’s go through the step-by-step process of buying a franchise so that tasks that may look intimidating will be manageable, including but not limited to what to look for when signing documents. We do advise you to hire a franchise attorney to help go over these documents. We will cover franchise fees and more.
With proper research and preparation, you will be prepared to buy a franchise.
Step 1 – Industry Research
Start off by asking yourself the following questions:
How big is the demand for your industry of choice? Is it a niche? Is it a growing Industry? And are there thriving companies in this niche?
Let’s discuss them one by one.
The first thing you have to remember is – a business exists to serve people’s needs. If there is no demand for a product or service, however great the idea may sound to you, it won’t be profitable.
Look for sustainability and be aware of fly by night industries or fads. These are the kind of businesses, that are here one day and gone in the next. Franchises of this kind won’t survive. The best thing to do is to invest in a proven industry that will never go out of style, like maintenance services, restaurants, etc.
Now, that you have narrowed down your industry to sustainability and know what you should be looking for your business search begins and it’s time to research companies.
Step 2 – Company Research and Expectations
The more you know about what the company does, the more you will be prepared. Read business models and strategies for companies your interested in and learn what they promise their clients to decide if you can meet those client expectations. Research the average age of companies. how long have they survived? Look into investments and earnings. Can you afford to run the company and will your returns be worth your investment. Knowing the companies you’re interested in will put you one step closer to franchise ownership. Contact existing franchises to help prepare you to keep your expectations realistic.
After you decide which company to work with, contact them
Step 3 – Contact Businesses
After you made up your mind which company you want to work with, you should contact them. You should be able to find the companies contact information on their website or by using search engines and local directories.
Arrange a meeting with Franchise owners as they will be the only people who will be able to provide details about running their institution and discuss anything related to buying a franchise. It’s best to contact businesses during their downtime. For example, do not contact a restaurant during lunch or dinner. You will want to speak to management and owners without distractions and get their full attention. You will find that most Franchise owners will take the time to meet with you to discuss their franchise and of course if the franchise is for sale they will meet with you to discuss the price of the franchise for sale in a franchise proposal.
You should also consider contacting different branches/locations of the franchise if they have more then one location. This will give you a better evaluation of the business then visiting just one location.
Step 4 – Calculate Expenses
After the meeting with business and franchise owners take your time to calculate if the franchise proposal suits you. Some offers seem cheaper at first sight because their up-front payment is lower than the rest. Consider the business will most likely have ongoing monthly taxes. This might or might fit your budget. Taxes vary from business to business. Some companies require only upfront payment as opposed a payment plan. This will generally be a higher initial investment but will save you fees over time. These companies with higher upfront payments may have lower taxes which may be why payments will not be stretched over a payment plan
If in the process you have follow-up questions, don’t hesitate to ask the franchisor. The more clear your intentions are, the better off you will be.
Step 5 – Calculate pros and cons and make a decision
By this point, you should have a realistic offer and you know what the business will cost you. Now’s the time to ask yourself – Is it all worth it? This will be your decision to make based on your evaluation of the company. Remember to consider your evaluation based on Industry, location, cost of investment, returns and your overall assessment through evaluation. Make a list of pros and cons to help you make a decision. try to have at least 2 different companies even if you have it narrowed down to one to help you make a final decision.
Step 6 – Sign the contract
So you’ve come this far. Signing the franchise disclosure document (the contract) will bound you to this company for years with a licensing agreement. So it’s of crucial importance to make sure you don’t have any uncertainties and have no questions left unanswered/undisclosed. The FDD includes information about the fees, taxes, and permission to carry on the trade. It’s signed only after both sides agree.
You will need to prepare the required documents such as professional certifications, drivers license and whatever your future career requires.
It is highly recommended that you hire a lawyer of professionals with experience with FDD’s