Franchises come in all sizes.
You’re ready to go into business, and you’ve decided that purchasing a franchise is the way to do it. When you buy a franchise, you’re purchasing a ready-made opportunity with all operating aspects already in place. However, there are downsides to buying some franchises that may not be apparent until you’ve already opened your doors for business. By taking your time and doing your research, you can have a successful franchise with minimal risk.
Instructions
1. Determine what kind of business you feel comfortable running. This is an important step because once you begin calling for information on various franchise opportunities, you open the door to some aggressive salespersons. Make a list of all the business opportunities you would like to own and eliminate the ones that don’t fit your needs as your research progresses.
2. Research the demographics in the area where you want to start a franchise. The federal government maintains a website dedicated to providing you with statistics, searchable by state or industry. (See Resources)
3. Find a trade show for franchisers where you can talk to several different potential businesses in one place. Although a trade show is not the place to sit down and discuss financial terms, you can find new franchise opportunities in your desired industry that may be less expensive.
4. Request information packets from your narrowed-down list of potential franchises. When the promotional materials arrive, look them over carefully and investigate similar industries in your area to determine your likely growth potential.
5. Call your state attorney general’s office, and ask if there is a franchise regulator in your state. If so, contact them and ask if the franchise in question has ever appeared on their radar. In addition, if your state has a franchise regulator, request a regulation packet before hanging up.
6. Pinpoint a location. This crucial step is often frustrating. Different industries suggest specific demographic considerations when choosing a location. For instance, a liquor store may get more business if it is located on the right-hand side of the road, on a main road or just before you exit the city limits. Finding a location that matches the demographic suggestions may be difficult. In some cases, your choice of location may exclude you from purchasing a specific franchise.
7. Make phone calls to both the franchiser and to other franchise owners. Ask about operating costs and projected profits, find out the extent of the training program and if you are liable for additional advertising expenses. Inquire as to the amount of support the seller offers to franchisees.
8. Find out if you will have a protected territory. Some franchises only sell a limited number of business opportunities and only to buyers who plan to put them a specified distance apart. This helps you as it protects you from another franchiser setting up the same store on the next block.
9. Think about it. The Federal Trade Commission (FTC) regulates the sale of franchises and allows you a minimum of five days in which to have your attorney and financial manager look over the legal documents before asking you to sign. In addition, you are given a “cooling off” period of 10 more days after signing to back out without penalty. Your state may offer additional rights.
10. Ask questions. Buying a franchise is a big financial step, and you deserve all the answers before you embark on the journey. No question is insignificant. The more prepared you are before buying a franchise, the more successful you are likely to be.
