Buying a franchise often means a headstart in entrepreneurship compared to starting from scratch, but it’s not as easy as you might think.
Many prospective business owners will seek out franchise opportunities for a variety of reasons: established branding, marketing advantages, product recognition, etc. Franchises offer a great opportunity for those that want to reap the benefits of business ownership without starting from the ground up, and are willing to dive into the market headfirst. But, like any new business venture, franchise owners are faced with a daunting (and often crucial) question: where do I begin?
Finding the right fit matters. Industry studies show there is serious money in franchising — as long as you invest in the right opportunity. According to CNBC, American franchises collectively employ 8.3 million people and generate $802 billion in revenue.
Franchises are like sandboxes: all the tools for success are offered to you, but at the end of the day, what you build is up to you. Building the perfect “sandcastle” means first discovering the perfect “sandbox.” With this in mind, here are a few tips on finding the best franchise.
1. Setting standards
Buying a franchise is a huge life decision, and warrants thorough planning. Do your homework, and long before exploring market options establish a list of criteria that a franchise must meet. Write out some non-negotiable items and some items you might budge on given the right circumstances. A few areas to consider include:
- Independence — How much oversight will the franchise require, and will it afford you the level of flexibility you desire?
- Money — Obviously money factors into all business ventures, but what ROI are you expecting? How much capital can you offer up front, and what profit margin do you expect to garner?
- Interest — As a business person, you know that personal interests aren’t always the most lucrative financial opportunities. But still, you’ll be spending a lot of time building up this franchise, so it’s worth trying to invest in something you care about. This might mean seeking out brands you’re interested in as a consumer or finding a franchise in a business type you care about.
- Risk — Any business venture comes with an inherent risk, but how much are you willing to put on the line? Remember, high risk can often pay off high reward.
This is far from an exhaustive list of criteria, but these are the types of questions to keep on your radar when searching for the perfect franchise. With that out of the way, it’s time to narrow the search and begin being proactive.
2. Making a shortlist and reaching out
Business experts say it’s a good idea to shortlist 10 franchises and go from there. Try creating a spreadsheet to list possible franchises and their most important features. Information to include in this document might be items such as: franchise name, industry, startup cost, risk level, etc.
From here, you can narrow your research down to specific franchisors. Research the company’s history, financial stability, future prospects, and more to gain a holistic snapshot of what you will be investing in.
Also, make an effort to talk to current franchisees that would not be direct competitors. Ask them questions such as:
- Do they feel supported?
- What is the franchiser culture like?
- Are income and ease of operation claims accurate?
The best way to get valuable information is to simply ask. Current franchisees will have the best insight into the company, so their opinions and experiences will provide invaluable insight.
3. Explore online resources
Once you have a general, ballpark idea of what franchises interest you, it will be time to actually start shopping around. There are several ways to shop for franchises, and each method has its own advantages and drawbacks, but the best route for average buyers is to shop online. The ease and flexibility of shopping online makes it the perfect buying option for busy entrepreneurs and those new to the market alike.
Finding the right franchise opportunity in online directories is an intuitive way to explore options, compare prices, and uncover opportunities you might not have considered. Each site is different, but be on the lookout for online directories that offer advanced search features for refined and accurate results.
Being on the verge of franchise ownership is exciting, but give the process the due diligence it deserves. Buying a franchise requires a great deal of effort and is a major business decision, not to be approached naively. However, if you practice a few proactive measures, and do your homework, you’re sure to see significant ROI and eventually develop the franchise you’ve always wanted.
By Bruce Hakutizwi, USA and International Accounts Manager for BusinessesForSale.com, the world’s largest online marketplace for buying and selling small and medium size businesses. Bruce has over 7 years’ experience working within the US business transfer marketplace connecting buyers and sellers.