Franchise, If you think franchising is for you, but you don’t’ know where to start the search process, you’re’ not alone.
Identifying the perfect franchise opportunity can be challenging and take some time, no matter how open-minded and experienced you are. To find the franchise that will be a good fit for you, you should pursue a more established course of action, often called the discovery process. Here’s how you can avoid making the wrong decision with our eight-step process.
Define your goals.
What are the reasons that caused you to consider franchise ownership in the first place? They can include the desire to be your boss, a better balance between work and family, the interest in using your skills to build your net worth, and other similar factors. Be brutally honest. This is the time to look deep into yourself to locate your true desires. Setting goals is an important starting point for your business.
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You may not need any particular skills to qualify for most franchise opportunities. Most franchises appoint relatively inexperienced investors as franchisees and offer comprehensive training programs to get them up to speed with the brand’s business practices but evaluating your personality and defining your personality goals can be helpful.
Decide on an industry.
Once you know your strengths and goals, you’ll understand which franchise opportunities will help you reach your full potential. For example, if you’re’ technically inclined, you could be destined for the IT sector. On the other hand, if you love interacting with people, you could start a van-based or Sales business.
Identify some franchise options.
Do your homework to identify an initial group of franchise opportunities that meet some or all of your criteria. It’s’ good to have at least a few options to compare. Look into franchises that interest you and ones that you can see yourself running. Consider the “day-in-the-life” of the operators to make sure you can visualize yourself in their place.
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The first place most people search for franchise opportunities is online. Unfortunately, this method can be somewhat frustrating due to the vast number of options available. It’s’ also challenging to discern between different types of franchises.
Make initial contact.
See how the franchisor handles your inquiries. If you get sent to voicemail, note how long it takes for them to return your call. Don’t’ hesitate to ask to talk to different members of their organizations to feel for their company cultures. Keep track of how the initial communication with the franchisors plays out:
- Did they answer the phone live with a professional greeting?
- Did they answer all of your questions to your satisfaction?
- Did they ask for your information?
- Were they courteous, professional, and interested in you and your needs?
- Did they offer the next steps? That is, did they send you information?
- How do you rate them each on a scale of 1 to 10 (ten being best)?
Identify their processes.
When you contact a franchisor, ask them to outline their franchise sales and qualifying processes. This will help you stay on track and ensure progress. Be wary of companies that don’t’ seem to have any systems or methods to follow. A franchise opportunity should be all about plans on all fronts.
Review your budget
Before you can start to narrow down your choice of franchises, you’ll’ need to work out how much you can afford to spend on your business. Usually, banks are willing to lend prospective franchisees up to 70 percent of their total initial investment cost, so you should be able to consider franchise opportunities above your current budget.
Don’t forget that you will also need to save some working capital to keep your business afloat for the first few months until it reaches its break-even point.
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Evaluate the franchise documents.
Once you’re’ received the franchise disclosure document (FDD) and the franchise agreement from the franchisor, it’s’ a good idea to have a qualified franchise attorney review the franchise disclosure documents with you. However, a standard business attorney may have little or no experience in franchising and could end up costing you more money and time since they’ll need to learn the industry.
Attend franchise fairs and exhibitions
Franchise events take place regularly, and they offer a fantastic opportunity for people to explore investment options. Not only do you have the chance to discover new franchise brands, but you can also talk to their franchisors and existing franchisees.
Most franchisors hold regular discovery or decision day events. This gives you a chance to visit their headquarters and meet their team. These events are opportunities for both the franchisor and you to size up the potential business relationship. Please make no mistake: They’re’ looking closely at your personality, your manner of dress, and all of the other social cues that exist whenever you first meet someone. You, of course, should do the same. As they must feel comfortable with you, you must be pleased with them.
Remember that you may be in business with them for five or even 20 years, depending on the franchise opportunity. Therefore, this is a decision that must sit comfortably with you on an emotional level and a business and financial level.
Characteristics of a substantial franchise opportunity
Here are five characteristics of a substantial franchise opportunity that will help you know when you have found something worth pursuing.
The location is favorable.
The phrase “location” originated for a reason. Suppose the franchise is not in a location that is easily accessible to a large number of people that need or desire its goods and services. In that case, it may be difficult to achieve profitability no matter how good the business and marketing plans may be.
For businesses whose model is to provide goods or services at the customer’s home or business, the office’s location may be less critical. However, other factors such as rental cost, parking for employees, and safety still make a place an essential component to consider.
Sales at existing locations show steady growth.
Businesses grow at different rates, but the companies most likely to be profitable over the long term show steady growth rather than a massive spike in sales in a short period. Trends come and go, so the considerable end today could turn into a freefall next month or next year as customers get bored and move on to the next big thing. Finding a franchise that meets customers’ ongoing needs is a better opportunity than jumping on a sales drive that may not last more than a few years.
Little competition for the same goods or services.
Some competition is not always a bad thing since it can show steady demand. But finding a relatively untapped market for needed goods and services will allow your franchise to gain maximum sales. Some franchisees even try to determine what construction projects are scheduled in the area to ensure that a similar business won’t pop up a year or two down the road.
Ample support from the franchisor.
Finding out what kind of support a franchisor will offer is a wise idea for any franchisee ahead of time. Substantial franchise opportunities will include franchisor help with training, marketing, and wholesale pricing for supplies. Of course, franchisees who have their sources for some of these needs may still find good opportunities outside these parameters, but typically, the more help the franchisor gives, the better the chances for success.
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The contract is simple to understand.
Franchise contracts are notoriously complex, sometimes spelling out the business practices franchisees are expected to follow in specific detail. However, consistency across franchise locations helps customers know what to expect and contributes to brand loyalty, so specificity isn’t always alarming.
However, it is essential to fully understand the terms of any contract so that you know what you’re getting into before you sign on the dotted line.
Becoming a franchisee
If you’re’ hoping to find the perfect franchise for you, don’t’ limit yourself to the apparent channels; get out there and network. Make new connections and ask for their opinions, hold industry publications and use the internet as a research tool.
While it’s’ tempting to only go for famous franchises you already know and love, it’s essential not to ignore smaller brands. While established franchises might have a vast customer base, they can also be expensive, and by overlooking up-and-coming businesses, you might miss out on a fantastic, budget-friendly option.