Startup Junction

Starting a business from scratch is not everyone's cup of team. Sometimes we are better off buying a franchise. However, it is very important to understand that even franchises carry the same kind of risk any other business does. Not only that, some franchiser are out there just to scam people and take their money. Below are some tips on how to find a good franchise:

Family and Friends

This is the best way to learn about a franchise. It is very much likely that one of your family members or friends or someone in their extended network owns a franchise. You should request them a meeting and learn about their experience. While this should not used to make a final decision, but it should be a good stating point. It is also possible that you actually do business with a franchise e.g. a sandwich shop for the lunch. You should see if the onwer of the franchise is willing to spend some time and talk to you.

Attend a Franchise Expo

Almost every region has a franchise expo every year. You should attend a franchise expo in your region and learn more about the opportunities. This also gives you an opportunity to compare and evaluate various franchise options.

Explore Franchises Online

Internet is a great resource. Almost every franchise has a website and you can request their propsectus. You can also read franchise reviews online. Try our business forum and see if anyone can answer any questions for you.

Visit Various Franchises

Visit various kinds of franchises and multiple stores of each franchise during various hours to see what kind of business they do and what customer preception is. Treat yourself as a customer and see how the service is and if you like their products and services. Speak to your family and friends about their experience with the franchise.

Create a Budget

You should create a budget on how much will you be investing. And you should stick to that budget irrespective of how much someone tells you of a hot business opportunity.

Understand Various Businesses

You should understand various businesses and see what it takes to run them. For example, if you are looking for a 9-5 schedule then buying a corner store or a sandwich shop may not be something you are looking for. You should be comfortable with doing any task involved in that business. For example, if you want to own a sandwich shop you should be willing to mom floors, clean dishes and carry out garbage because there will be times when you won't have enough help and you will need to do. Also, in the beginning you would want to save as much as money as you can by doing some work yourself.

Understand Franchise Background

Once you have identified a few of the franchises then you should try learn more about them. Below are some good questions to ask:

1. How long has the franchiser been in business?
2. How many franchised outlets currently exist?
3. Where are they located?
4. How much is the initial franchise fee and any additional startup costs?
5. What are the royalty payments? Royalty is percentage of sales you will have to give them meet marketing and other administrative costs.
6. What management, technical, and ongoing assistance does the franchiser offer?
7. What controls does the franchiser impose? Even though it is your business, you will be regualted by them.

How much you can earn

Due to FTC regulation that if a franchiser makes a claim of certain amount of income then they have to give you the proof. To avoid this regulation most of the franchisers do not provide that data. Instead the may use some indirect method such as number of stores they own and total royalties they collected. This amount will not have a individual store breakdown. This way you can learn about the average revenue per store because percentage of royalty is the same for everyone. But average revenue does not mean that the stores are actually profitable because each franchise's profitability depends on its operator's ability to run a business and the area it is located in. You can interview existing franchise owners and they might answer a few questions for you e.g. how long it took them to recover their initial investment?

Do not be pressured

Do not get pressurized in any case. If a frachiser is using tactics such a last location left in the area etc, it means they may not be honest. Just walk away from them.

Study the Documents Carefully

Carefully read Franchises's offering. Understand every aspect of it even before making an initial investment of a franchise fee. Whether you are buying a new or existing franchise hire a lawyer and CPA to help you through the entire process.