Thinking of owning a business, or a franchise specifically? Let’s get you started.
Authors: Meg Schmitz, Franchise Guru
Have you ever considered owning a business, or buying a franchise? Buying a franchise requires a huge investment of your time to research the right brands, but can be a waste of time if you don’t know where to look, or what questions to ask. Before jumping in too far, understanding the initial steps is a good place to start. Just like buying a home for your family, buying exactly the right franchise for your personal, professional, and business needs requires proper consultation and care.
Owning a franchise is like buying real estate. You cannot just barge into the franchise market and buy any franchise you like. The approval process is a mutual undertaking, and very competitive for the best brands and markets. Investing in a franchise is a major financial decision and thorough Q&A is necessary before you have total confidence. The point of concern is how to identify which franchise best fits your current and future needs, and where you should invest to realize the maximum profit or return. Here is a step-by-step guide on how to buy a franchise.
1. Be sure about your reasoning
You want to own a business for a variety of good reasons: be the boss, never get fired again, financial control of your future, etc. Assuming you have the time and resources to undertake business ownership, let’s think about how to choose whether an independent, or a franchise, is the right one for you. Let’s say a friend has opened a restaurant and there is a line out the door; that doesn’t mean he’s happy, well-staffed, making a good return, or working hours that HE wants to be away from his family. Say another friend invests in a franchise, and can happily check all of those boxes. If you are unsure about what business to invest in, you should work with an experienced franchise consultant who will assist you in doing a self-assessment on what skill sets you want to use, define what you’ll be happy with, versus what you want to avoid, and assess the support you have from your immediate family. No one I’ve worked with makes this investment without full household support.
2. Research which franchises will stand up to the Gold Standard test
Let’s say you have the money and time to get into business, but you do not have a unique idea or a business plan to prove viability. In that case, you may end up wasting a lot of time trying to create a business from scratch. However, investing in a proven franchise means success is already defined and calculated, and the “recipe” can be replicated. Franchising is exactly like buying a recipe… just follow the steps and you will get a great outcome. That said, you still need to look into the leadership and success over the last couple of years to appreciate the full support you will receive as you manage and/or operate the business. Your success as a business owner will be achieved when there is full mutual understanding of consumer demand, franchise support, and your ability to execute the proven recipe.
3. Begin the application process
Once you and your franchise business coach (me) have decided on a handful of franchise concepts that would best match your areas of expertise and engagement, we will begin the application process. Like working with an executive recruiter, the right doors will open with the right introductions. A good franchise development person will first assess your qualifications, and will explain in detail what each company will require from a prospective owner. Every franchise has its own set of regulatory guidelines regarding opening a new outlet, and failures must be reported. So there is “skin in the game” on both sides to make sure the eventual match will prove to be a successful one.
Franchise concepts that are reliable will clearly spell out their discovery process, and every decision point that needs to be made. Your franchise business coach should be able to help you with the whole process when you align with someone who clearly knows franchising from the company’s founders and leadership, to funding, to operations and support.
4. Plan and Prepare For your “Discovery Day” meeting
Discovery day is really more like a Meet The Team event now that we’ve all pivoted into the virtual meeting space. Discovery takes place during the weekly webinars and conversations. Nearing the end of Discovery is your opportunity to Meet The Team, where you will be invited to have interaction with every department that will help you launch and operate your business. When you demonstrate to your preferred franchisor that you are ready to do business with them and follow their outlined rules for success, you have a great chance of being awarded to opportunity to invest. I did not say you will get accepted… there are always minor things that can make them say “no thank you.” You need to have the following checklist complete before the Day of Discovery meeting with the franchise headquarters:
• Complete your personality profile as a candidate.
• Get investment for the franchise pre-approved by your financer.
• Prepare a list of any questions, concerns, and issues you may have as a candidate.
• Discuss discovery day agenda, arrange accommodations, dress appropriately, engage actively, and do not forget to carry all the necessary documents and paperwork on the day of the meeting.
5. Apply for financing
This is a step that you want to initiate as soon as you start conversations with the companies. They will know quickly if you are a viable candidate. If so, you will want to research your funding options if you don’t have all the money in the bank already. Because of the pandemic and resulting economic demand for loans, plan to apply for financing as soon as possible, whether you are aligning with a franchise or not. Banks would rather bet on a franchise, by the way, than an independent business plan. They know the success rate varies drastically from one to the other, and underwriting will more willingly loan money to a Gold Standard franchise concept. You need to plan to pay the initial franchise fees and training costs, and start working on setting up your physical business as soon as training is complete. It is important that you do not delay the necessary financial stepping stones to get open, or hold up the franchise development schedule, by making sure that everything is set in place as soon as possible.
6. Review and return your franchise paperwork very carefully
When you are granted the franchise agreement and have approval to join the brand, this requires a lot of paperwork and documentation on both ends. This is quite important as the legal documentation acts as the backbone for the business. It is an agreement between the franchiser and the franchisee which holds all the rules and regulations, and conditions of both parties. Once the franchise seller is done with the paperwork, the papers and documents will be handed over to the franchise buyer for his sign of approval. This is your last and final chance to reread and review the paperwork thoroughly (you will have been given copies well in advance of the final signing). Keep in mind that reading the franchise agreement is quite an important part of the whole process as it is what both parties will follow. The franchise agreement is customized to your particular territory and market, and can be considered the most important document in the whole process. Keep a copy to remind yourself of the agreement, and do nothing that violates the relationship between both parties.
7. Site Selection and the importance of Geography and Demography
As you evaluate where to start a business, you will need a suitable mechanism to assess viable geography as well as demography… for both clientele and employees. Choosing the right real estate location is an important step. For instance, if you are opening a doggie daycare in an area that has a lot of rush but limited accessibility, or you open a cleaning service but your teams are driving miles around lakes and obstacles, your business may not flourish as much as you project. Hence, location plays a huge role in attracting and retaining the magnitude of clients and employees to your business. Franchises spend a considerable amount of resources on site selection and measuring success factors, helping their owners locate and continue to expand their successful enterprises.
8. Get training and support
It doesn’t matter how great your business is if you can’t pivot and adapt. We’ve all learned that the hard way with the recent pandemic. I’ve seen a lot of independent businesses give up and go under because they didn’t have the resources to stay afloat. When you are buying a franchise and starting your business, you will get pre- and ongoing training to hone your skills. The franchise provides you with experienced professionals at headquarters, who will train you and support you in every aspect of your newly started business. The franchise will do everything possible to help and support you, so that from Operations and Marketing to Compliance Rules and Regulations of the franchise. Another objective of the training is to help each franchisee match their operations and financial performance to the standards of the franchise. Independent businesses don’t have this depth of resources available, and thus flounder. Franchise owners are able to perform in a way that is homogeneous to the other outlets of the franchise. Think about McDonalds and The Big Mac. If they leave off the pickles, you know it. If the French Fries taste different in Chicago than in Indianapolis, you’re mad about it. uniformity is a key element to any franchise concept’s success. They pay special attention to every detail and want the customer experience to be consistently excellent. Training and support are basic measures that a franchisor implements to help the franchisee set up their business outlet.
Franchise ownership is business ownership complete with the tools needed to trim, repair, and smooth over the inevitable challenges of a new endeavor. I learned this lesson when I started my journey as a franchise owner 30 years ago. I understand the fear of leaving the “comfort” of a corporate desk job. The reality is, your position will only be around as long as it is convenient for your company. You are a free agent, a journeyman, and not a permanent fixture. It’s when you feel you’ve achieved your greatest professional success that you’re in danger of being downsized. You have everything to gain by betting on yourself and working with a proven franchise leader. The playbook and rails are in place. We just need to find the perfect match. I provide complimentary consultation services to individuals considering franchise ownership. Much like an Executive Recruiter, when a match is made, the franchise company, sends me a placement referral fee. Contact me at megschmitz.com to learn more.