How to Select a Franchise

How to Select a Franchise

This is a very big subject so we will try to be as laser like as possible and give you the essence of the information you need in order to properly select a franchise.

First, you must ask yourself certain questions and be very objective. Why do you want to own a franchise? If it's to get rich or to get on easy street and not have to work, then franchising will probably not meet your expectations. If you are like many people who have the dream of owning your own business, being your own boss and having control of your life, then franchising may be for you.

The truth about franchising is that it's very rare that franchisees get rich. It's also true that as a franchisee you generally work long hours, especially the first year. A franchise business is like nearly all businesses, it's hands on, you have to be there to make it happen. You have to literally keep your hands on it. Generally, a franchise is going to involve longer hours and more stress than would a job where you just put in your time and then go home and forget about it until the next day. However, franchising gives you the chance to do something really significant, and that's to be in business for yourself, be your own boss and control your own destiny. This is the chance to realize the dream. It's been said that the truly happy people among us are those who are living their dreams.

After evaluating yourself, the next step is to begin the search. Look through the information here at the FranInfo site. The critical thing at this point is that you must be realistic and look at opportunities that are in harmony with you, how you think and what your interests are. Imagine yourself operating the franchises that look interesting. Can you see yourself happy in that environment, day after day, possibly for years.

If you are interested in any specific companies, send us an email. We will see that you are contacted. The least you will receive is a letter and a brochure and from some of the more progressive companies you will get a video. Examine these materials carefully, they are generally very revealing. After you narrow your search down to one or two franchises it's time to visit a operating unit if you haven't already. Ask the franchise sales rep where the nearest unit is located and arrange to be met there by a owner or manager who can answer your questions. Spend as much time at the unit as you possibly can, be there at different times of the day, during peak hours and during slow times. Talk to the employees, customers and the owner or manager. If you do this thoroughly you should get a good read on the viability of the concept.

If at this point you want to continue, the next step is to visit the home office. Here you will get a guided tour of the offices, meet key people, usually including the President, and generally you will visit a flagship unit, either company owned or a franchise unit. After the tour you will sit down with a franchise sales person and be given the sales presentation, which is of course designed to sell you. You will be given a Uniform Offering Circular (UFOC) to take with you. This is a compilation of a great deal of information on the company and the opportunity. The Federal Trade Commission requires that you be given a UFOC at the first personal meeting. It will have information on the history of the company, backgrounds on the officers, financial statements on the company, a copy of the franchise agreement, a list of current franchises, franchises that have closed and litigation history. This information is critical to evaluating a franchise opportunity.

Analyzing the UFOC is tricky and professional help at this point can prove invaluable. You want to pay close attention to the history of the company, the backgrounds of the officers, the financial statements and the litigation history.

The following are the steps you should take upon returning home.

1. Analyze the UFOC (Professional help recommended) In the UFOC you want to see strong financial statements, highly experienced people in the key positions, a company that has been in business for 3 years or more, the longer the better, has a large number of units and has few closed or bought back.

2. Closely examine the franchise agreement. This is the contract between you and the company. Franchise agreements are always biased in favor of the franchisor, that's just the way it is. This can be good and bad. The company can be unfair in it's dealings with you and the franchise agreement may allow this, on the other hand you should want a strong franchisor. For example, McDonalds is so successful because it is very tough on franchisees who do not maintain McDonalds high standards of product quality, good service and cleanliness. This strict compliance is only possible through a strong franchise agreement.

3. Call as many franchisees as possible. Call at least 10. Find out how they are doing. The key question is "Would you buy this franchise again?"

4. Visit personally as many operating units as possible. At least three. Often the owner or manager will be more forthcoming in person than over the phone.

5. If everything still looks good, then contact the sales rep and get as much definitive sales information as possible. Most franchisors will not make earnings claims but they will provide information with which you may extrapolate gross sales.

6. If everything still looks good then go for it.

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