Write down a Vision and Get Clear
Attend the Franchisor’s Discovery Day
Review the Franchise Agreement Carefully
Prepare for Your Grand Opening
1. Write down a Vision and Get Clear:
This is the most important step, don’t skip it. If you are planning on taking a road trip- what’s the first thing you need? A destination. You need to know EXACTLY where you are going. This is the foundation to every other decision you make in the Franchise Buying process.
How much money do you want to make in your business?
What lifestyle do you want to live and how will a franchise impact that? Do you want Monday - Friday only, do you want your family to be involved? Is there something that is a definite NO?
What kind of industries, brands or concepts excite you and suit your background?
2. Identify Your Skill Sets and Where you are NOW.
Going back to the road trip example. What’s your starting point? That will determine what route you take so you can map out how to get to your destination. Get really clear on where you are, who you are, and what you have. Trust me this will make your life easier down the road.
What are your current skill sets and what are you really good at? Sales, Managing, Operations, Relationships?
What do you truly enjoy doing? What makes you feel the most alive and happy?
What do you strongly dislike doing? If you know you hate sales, well that’s an important factor if a Franchise involves a lot of selling.
What do you succeed at naturally and what is a struggle for you?
What is your current financial situation? Liquid assets and total net worth? You need to know this to understand what Franchises you can afford, and Franchisors will ask you for this as well.
3. Find a Franchise that aligns with your Vision.
This is where you get to use your Step 1 and 2 to guide you. What Franchises align with your vision? What business can you really see yourself succeeding in? Less is more in this case.
Make a list of industries or Franchise concepts that you are interested
Make a scorecard with 10 characteristics of each franchise to rate them
Research Franchise companies, and compile a list of 3-5 that you are most interested in pursuing
Consider things like:
The franchise system’s size and three-year growth trend
The franchise’s brand presence in the prospect’s state
The franchisor’s leadership team and their experience
The initial investment, one-time fees, and potential ongoing charges
Support offered to the franchises like training, financing, and operational assistance
The franchisor’s financial performance
4. Get your Financing and Legal team set up.
Don’t wait until you know exactly what Franchise you are going with until you have a strategy for your Financing/ Funding and Legal side of the business. Having a strategy NOW will set you up for success later in the process and you’ll be more prepared which will make the entire process less stressful.
How are you going to fund the business? Cash, SBA, ROBS (401k or IRA), HELOC
If you can, start applying NOW for your financing. Have an understanding of what you may need to get ready and what the timeline is.
Put your legal and tax team together. Reach out to a tax advisor and/or lawyer.
Create the entity for your business. Whether an LLC, S-Corp, C-Corp. A lawyer and accountant can help advise you on which one depending on the state you live in.
5. Submit Request for Consideration/ Application with Franchisors
This is where the fun begins. You are formally reaching out to the Franchisor and putting your hat in the ring.
Realize that Franchisors are interviewing you as much as you are interviewing them.
Submit your information accurately, and thoroughly- be detailed this is your first impression.
6. Begin the Franchise Overview Process
This is where things can start to move fast, and most people are not prepared and get overwhelmed. This is why we front load the steps, so that you have a really strong foundation built to handle this part. This is not where you want to slow down, this is where you want to be able to move forward confidently and put your best presentation forward with the Franchisor.
You’ll schedule an initial presentation with the Franchisor. They’ll learn more about you and your goals, and explain the Franchise at a high level.
They’ll talk about what they are doing and what you are doing.
7. FDD- Franchise Disclosure Document
Once you’ve learned about the Franchise at a high level, and have sat through the first presentation, they will typically send you their FDD (Franchise Disclosure Document). All Franchisors are regulated by the FTC (Federal Trade Commission) and are required to have an FDD, which is a standardized legal disclosure document and often be a few hundred pages long. It will also include a copy of the Franchise Agreement. The FDD is a legal disclosure document that a Franchisor must provide to you not less than 14 days before you sign a franchise agreement or pay any money to the franchisor.
Review the FDD and note any:
Red flags or questions you have for the Franchisor
Look at their growth trend, how many stores have opened or closed in the last 3-5 years.
What are the fees and Initial Investment? (Initial Fees, royalty fees, and other fees)
What lawsuits have they been involved in if any.
What does Item 19 look like (Financial Performance)
Schedule a call with the Franchisor specifically to have them go through the FDD with you.
8. Do your Due Diligence!
I know at this point you may be REALLY excited and eager to move forward, but this part is SO important! You’ll get the opportunity to really understand the Franchise from other Franchisees, as well as doing some research on the ground. Their contact information will be in the FDD.
Come up with 7-10 questions that you ask to existing Franchise Owners. (10 Questions to ask Franchise Owners)
Talk to AT LEAST 3-5 Franchise owners, from different geographic areas. You want to get a thorough picture of what their experience has been like.
Go visit a few different locations as a customer, call locations and pretend to be a customer and inquire about their service.
Anonymously ask the staff questions about how they like working there, or what is the most challenging and fun part about their job.
Research competitors in the space, and see how the Franchisor compares. Will you feel confident in the product and service you offer?
9. Attend the Franchisor’s Discovery Day:
Discovery day will give you a really good idea on whether you are interested in pursuing this franchise or not. Depending on the Franchisor, this step may happen earlier in the process. This is your opportunity to ask tough questions, and to really get a thorough understanding of the business model, opportunity, competition and if this aligns with your vision for your business and life.
This is a great chance for a potential franchisee to get to know the franchise and its management team.
Note any possible red flags during discovery day (personality or cultural misfits, disorganization at the corporate level, hard sells)
Reference the 25 Questions to Ask a Franchisor
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