18 Steps to Franchising: Vetting Existing Franchises

Make 2015 the year you become your own boss. Here’s everything you need to make your due diligence culminate in a franchise.

18 Steps to Franchising: Vetting Existing Franchises

1. As you go through this process with each franchise company,

You should be constantly evaluating the relationship as well as the actual information you are receiving. If you find the company to be very responsive and helpful, that’s great. If, however, you find it to be unresponsive or unco-operative, move away, unless you want to end up spending years being treated in such a manner.

2. At some point, the company will provide you with its official franchise disclosure document.

This contains a great deal of information about the history of the company and its key employees, costs associated with the franchise, training available for franchisees, a list of existing franchisees and perhaps even earning information about existing units in the system (although this is not always the case). You should read this entire document carefully, and make sure all the questions you have about it are answered in full.

3. Assuming you progressed this far with a company and are still interested, the next step is to call existing franchisees.

You want to find out how they feel about the company and the business. How are they doing financially? What’s their day-to-day routine like, and what skills have they needed to be successful? What are the biggest pluses and minuses of being a franchisee of this company? What challenges have they had to overcome that they weren’t expecting?

Knowing what they know now, would they still do this? You should also tell them what you want to accomplish by owning a franchise and ask whether they think you can do so with this opportunity.

4. Carefully analyse any required marketing programme.

What it is, what it costs, and most important, what the franchisees are currently paying for it. This is one of the biggest sources of value (or conflict, depending on the system) in franchising, so dig in to it until you have the answer.

5. Confirm that the existing franchisees feel that the franchise company adequately protects them from internal competition.

Some franchise systems place too many units too close together, and franchisees’ businesses may be cannibalised. Encroachment may not be an issue, but make sure you check.

6. If you expect to get financing for part of your franchise operation (which is fairly typical)

Ask the franchise company what plans or programmes it has in place to help you do so. You should also ask existing franchisees how they obtained financing so you can get a good feel for whether this will be a challenge for you.

7. Develop a strong sense of how well the franchisee training programmes prepare you to operate the business.

The most important existing franchisees to visit are those who have just started up in the past year or so, since their information and opinions are more likely to be relevant to your situation.

8. Most of the companies you look into will be eliminated either prior to or at the point of contacting existing franchisees.

That’s good. But if you’re still interested in an opportunity after step 33, you might just have a winner on your hands. At this point, you may want to take some time to look more closely at the other companies in this industry segment.

Go to each of their websites and see if one or more manage to catch your attention. If you want to learn more and compare them to the representative company you’ve been researching, start at step 24 with each.

9. After making a few calls to existing franchisees, you need to compile a list of questions for the franchisor based on the franchisees’ feedback.

You should be especially aware of any franchisee comments that seem to contradict the information you’re getting from the franchise company and make sure to clear them up.

10. After asking the franchisor to answer all the questions on your list and explain anything that isn’t clear, make more calls to other existing franchisees to verify the answers you received.

Once you get to the point with any franchise company where you’ve completed all these research steps and you’re still interested, you’re just about done finding a company to help you accomplish your goals and dreams of business ownership. Although we’re almost done, there are still some key issues yet to address.

11. Get out the narrative you created way back at step 8 and make sure that everything about this company matches up with what you decided you need to have.

Don’t let yourself be talked into something that isn’t going to get you where you want to be!

12. Make sure you’ve covered everything with your spouse, if you have one, and that he or she is completely on-board.

13. Try to call at least a couple more employees of the franchisor (other than the sales staff) to get a feel for their attitude.

The operations or marketing staff working with new franchisees or the CEO would be best.

14. Take a look around the territory you’re interested in.

Are there competitors, and if so, how do they seem to be doing? This will give you a final confirmation about the viability of the territory you’re considering.

15. Recognise that any anxiety you might be feeling is a completely normal part of this process.

If you’re like most people, you’re leaving your comfort zone by purchasing a business, so you’re going to feel fear about making the decision. Once it’s made, the anxiety will turn into exhilaration!

16. Examine the actual franchise agreement.

Read it carefully and make sure any questions you have are completely answered.

17. Ask the franchisor if the franchise agreement is negotiable.

Most good franchise companies will not negotiate their agreements, but if it is negotiable, hire a good franchise attorney to assist you.

18. Consult with outside advisors, including accountants and attorneys, who can provide information you need to make this important decision.



Jeff Elgin
About the Author
Jeff Elgin has developed a consulting system that matches pre-screened, high-quality prospective franchisees with the franchise opportunities that best fit their personal profile.

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