Buying a franchise can be an exciting opportunity to own your own business, but it’s a big investment, so you’ll want to do your due diligence.
Here are some tips on how to properly conduct franchise research to decide if it’s the right fit for you.
Start With Your Goals
Before looking at franchises, think about what your goals are:
- Do you want to own a business in a certain industry or field?
- Are you looking for an established brand name and support system?
- How much are you able to invest upfront and on an ongoing basis?
Knowing what you want to get out of franchise ownership will help guide your franchise research.
Look at Financial Performance
One of the biggest considerations is whether the franchise is profitable.
Review the franchisor’s Franchise Disclosure Document to see average sales, costs, and profitability of existing franchise units.
You’ll want to verify this with current franchise owners. Also find out how long it takes the average franchise to break even.
This will help you determine if the opportunity matches your financial expectations.
Interview Current Franchisees
Speaking directly with current franchise owners is one of the best ways to conduct research.
Ask about their satisfaction with the franchisor, the biggest challenges of ownership, and whether their unit has been profitable. Be sure to ask for evidence to back up what they share.
Also, request contact info for former franchisees to understand why they left the system.
Suggested Reading: Four Basic Questions to Ask Before Becoming a Franchise Owner
Evaluate Ongoing Costs
In addition to the initial franchise fee, understand all ongoing royalties, advertising fees, and other costs you’ll pay to the franchisor.
These plus overhead for your location will eat into profits. Make sure you can cover these while still meeting your income goals.
Also ask franchisees if costs have increased over time.
Assess Franchisor Support
A major benefit of franchising is the systems and support from the franchisor.
Discuss what type of training is provided and for how long. Ask about the franchisor’s site selection and buildout support.
Understand what marketing assistance is offered. Evaluate if IT, operational methods, and other infrastructure will help you manage the business.
The level of support can make a big difference in your success.
Next Steps After Your Franchise Research
Do your due diligence by having an attorney and accountant review the FDD and franchise agreement.
Their expert eyes may spot red flags you miss as a hopeful franchisee.
If the opportunity still looks promising after thorough franchise research, it could be the right investment you’ve been looking for.
Would you like to make this whole process easier?
Connect with Franchise Matchmakers, the professional franchise consultants that will help you with the entire process of finding your dream business.
Franchise Matchmakers is a team of franchising professionals dedicated to helping people explore business ownership as a career path.
Contact us at firstname.lastname@example.org to find out more about franchising options that may suit you.