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Finding the right franchise can be a daunting process, but there are a few things you may consider when searching. First, consider whether there is a need for this particular product or service in your local market. Competitors could help you learn about its prices, customer service, or how these products tested. These are all critical components to research when buying a franchise. There are many examples of franchisees introducing a product or service into a market and failing because the local community rejected the product or service or it was simply too expensive to educate the area about the franchise offering.
Second, you should talk with other franchisees in the system. When talking with current franchisees of the business, even those who were recently terminated, you should ask them questions regarding their profit margins, the degree of franchisor support, how they deal with competitors, and if they could go back, would they buy this franchise again. These are all important questions to ask early in the process to avoid possibly catastrophic issues in the future. Third, look for help. When searching for franchises you should consult with consultants and a franchise attorney.
A franchise consultant is someone who helps buyers match with a franchise that will meet their needs and goals. A good franchise consultant spends the time to get to know the buyer, give them personality assessments, and introduce them to several brands and concepts that are designed to help them meet those needs and achieve those goals. It should be noted that franchise consultants are typically paid on commission by the franchisor, so the buyer should still do their own research into each franchisor and franchise system.
When trying to find the right franchise, a buyer should also have an attorney review the franchise disclosure document and franchise agreement. All franchise agreements are weighed in favor of the franchisor, and for good reason. Having an attorney who is not familiar with franchising may result in an opinion that the franchise agreement is bad because it is weighed in favor of the franchisor. Having an attorney who is familiar with franchising is beneficial because that attorney has insight into what makes for a “fair” franchise agreement and what terms, if any, may be negotiable.
Finally, attend a discovery day with the franchisor. Discovery day is when a franchisor invites their prospective franchisees to visit a corporate location and learn more about the franchise and the day-to-day operations. This is one of the greatest opportunities for a candidate to obtain an in-depth understanding of the business and, in many cases, is one of the last opportunities to ask the franchisor questions before signing the franchise agreement. At Discovery Day, you should ask questions such as: What is the franchisor’s growth plan for the next 1, 3, 5 and 10 years? What is the franchisor’s marketing strategy for helping franchisees? How are the other franchisees in the business performing (especially those in your general area)?
When finding the right franchise, each prospective franchisee’s due diligence checklist will be slightly different. However, generally, if a candidate takes the time to learn whether their local area can support the franchise’s product and services; talks with other franchisees to learn about the pros and cons of the franchise; has a well-informed franchise attorney review the agreements; and attends a Discovery Day then they are well on their way to having all of the information necessary to make a well informed and educated decision.
