The opinions expressed by Entrepreneur authors are their very own.
The following excerpt is from Mark Siebertbook The Franchisee Handbook: Everything You Need to Know About Buying a Franchise. Buy now from Amazon | (*5*)Barnes and Noble | Apple Books | IndieBound
Although the Internet is an excellent tool for preliminary research, it must be used as a basis fairly than the only source of data. Combining online research with real-world exploration – equivalent to engaging with franchisors, brokers, competitors and industry events – will provide a more complete understanding of the opportunities that franchising offers.
In addition to digital assets, visiting franchise locations (each local and in distant markets) allows potential franchisees to evaluate operational quality, consistency and customer experience. Observing on a regular basis activities and comparing competitors can reveal potential challenges or opportunities that are not visible online or in promotional materials.
Franchisor
Your first source of data about a franchise company might be the franchise company itself. They will normally find a way to supply you with a wealth of data, including a Franchise Disclosure Document (FDD), franchise brochures or other promotional materials, links to franchisee references, and perhaps general information about the industry.
You can expect franchise salespeople to attempt to qualify you on the first call. Most will ask you to fill it out confidential information application form (CIRF) and discuss the peer review process. Typical qualifying questions will include capitalization, desired geographic region, and decision timeline. Assuming you are serious about investing in a franchise, you have to be honest in your answers.
The seller will often then suggest a series of steps that you just each will go through to learn more about each other. Some steps may include a phone call to debate FDD, market visits, phone calls to franchisees, and market research for your services. Use this resource as soon as you get to your shortlist.
Franchise brokers
Another resource that will help guide you thru the franchise purchasing process is a franchise broker. Brokers, who often call themselves “franchise consultants,” will be a precious tool in helping you evaluate your options.
Unlike a franchise salesperson, a broker is not limited to one franchise concept and may represent one hundred or more franchisors. In the best chains, the broker is trained to assist a potential franchisee narrow down the selection to a few opportunities for which he or she is a good fit.
You typically don’t pay a fee to a franchise broker. They provide this service in exchange for a success fee (essentially a commission) paid by the franchisor – normally $20,000 or more – if the introduction they make results in a sale.
Ultimately, brokers are a great resource that may provide real value, but they are not completely impartial advocates for buyers as some might imagine. So, while brokers are a resource it’s best to actually consider, ultimately it’s best to make sure they guide you in the right direction.
Trade and industry fairs
Another excellent spot to get information about franchises you may want to contemplate is franchise trade shows and, if you are looking for a specific field, trade shows. Franchise fairs in particular will permit you to check with several hundred franchisors from various industries in just a few days.
Such shows also have other benefits. Overall, they provide seminars about all points of the franchise – providing you with the probability to learn before you buy. These seminars cover topics equivalent to industry trends, understanding contract provisions, veteran franchise programs, financing, and overall success as a franchisee and are often price attending.
Please note that these programs will not be a representative sample of the franchise market. Exhibitors are likely to lean barely towards younger franchises and those with lower levels of investment.
Industry associations
The website With International Franchise Association incorporates a lot of data about the franchise. In addition to the ability to look for chosen franchisors, it provides information about industry suppliers in areas equivalent to finance, insurance, veteran programs, minority programs and the franchise purchasing process.
Players
Another thing it’s best to do is visit competing businesses – each franchises and independents – in your community. Ride around for a day or two, browse the Internet and start taking notes. Who are the competitors in the firms you are considering? How long have they been here? What are their competitive strengths and weaknesses? What is their pricing structure? What are their locations? Write all of it down – it can be the basis for good inquiries to potential franchisors later.
During off-peak hours, also visit local establishments that fall into the same segment you are considering. Talk to employees, who are often surprisingly willing to share information about how the company is doing if approached properly. Get a feel for how these firms compete in the market.
If you are interested in a company that does not have a physical presence, spend some of your “driving time” online by browsing their website. Pay attention to their prices and the way they position the offer. Try to get a feel for how big their market is. If it’s a service company, call them and ask for a quote.
Find out what advantage they have and how they are going to compete with you. Ask them the same questions you asked your goal franchisor. What support services can they count on? What is their fee structure? What do they think about the market and the franchisor? Perhaps they’ll inform you something about the company that you just didn’t already know.
Along the way, it’s also possible to visit the goal franchisor’s locations in some distant markets. Check if all of them work the same way. Do they provide the same products and services and at similar prices? Are their locations the same? Are all of them clean and well managed? If your first response is, “I can do a better job than them,” then the franchisor will not be doing a good job of quality control – and substandard franchisees will find yourself representing you because they are going to fly the same flag and keep customers informed. what they’ll expect when they visit your location.
Also attempt to get a feel for what the business owner or manager does on a every day basis. What could seem glamorous when you read about it on the Internet may become more mundane when you do this job day after day.