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6 Franchise Purchasing Tips

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6 Franchise Purchasing Tips

By FranchiseKing, Guest Blogger
Published: August 19, 2014 Updated: August 19, 2014

It can be pretty overwhelming to find a franchise business opportunity that you feel is right for your town, your investment level and your skills. There are so many choices these days, with new franchise opportunities appearing all the time. Lucky for you I have some steps you can take to help you make the purchasing process easier to manage.

1. Use The Internet’s Power

Don’t allow you to get sucked into a 5-day franchise website click-a-thon.

Instead of clicking from one website to another, hoping to find that “perfect” franchise to buy, use the search engines to help you narrow your choices.

Choose your favorite search engine, and type in very specific search terms. In other words, don’t type in “franchise opportunities.” Type in “franchise opportunities in healthy food,” or “franchises for sale commercial cleaning.” You’ll save hours of time.

Compare Opportunities

When you find one franchise opportunity that looks really interesting and matches your skillsets and personal traits, don’t stop there. Look for one or two more that are similar.

With an investment that will probably end up being more than $100k, it’s important for you to find the best franchise for the money, both short-term and long-term. One way to do that is to have conversations with the franchise development representatives from a few different franchises.

The other way to find out which franchise opportunities will give you the most bang for the buck is by talking to existing franchisees.

2. Research

In order to get to the heart of the matter and decide which franchise to focus your time and energy on, it’s crucial to talk to and if possible, visit franchisees of the concept you’re looking into. And, you’ll want to do this earlier rather than later…but not too early. Make sure you have a deep understanding of the business concept before you spend time in-person or on the phone with franchisees. They’re busy trying to make a living and will be more open to talking with you if you come across like you’ve done your homework.

3. Use The Franchise Disclosure Document

Once you’ve received the Franchise Disclosure Document (FDD), read through it. Highlight the things you don’t understand or that you have legitimate concerns about.

The 23 items you’ll find in the FDD are all important. Try not to get overwhelmed by the scope of the document. When the time comes, hire a franchise attorney (only) to go over the things you’ve highlighted. Franchise attorneys look at franchise documents every day and they know what to look for in them, and how to explain the legalities of franchise ownership.  

4. Use Professionals

Once you’ve found a franchise or two that you’re quite interested in, and you’ve done a good amount of research, it’s time to invest some money.

Consider hiring a small business accountant who can educate you on some of the future tax implications of being the owner of a franchise. Some of those tax implications have to do with how you’ll set up your franchise business. Some of the entities include an LLC, an S-Corp or a C-Corp. You’ll want to know the pros and cons to each one, so you can make an intelligent decision when and if the time comes.

A franchise lawyer (as I wrote above) is an important asset to have by your side as you get closer to making a yes or no decision on the franchise(s) you’re thinking of buying. It’s important to know all you can about the documents you may end up signing.

5. Use Your Instincts

Purchasing a franchise is a big thing.

Compiling all the data you’ve collected is important. Understanding the franchise contract, and going through the numbers is too. But, there’s another thing that’s equally important – and that’s you.

You have to trust your instincts.

If what you’re about to do feels right, you may want to move forward. If it doesn’t…if it just doesn’t feel right, you may want to move on. You can always come back. And, there are plenty of other opportunities in franchising to look into if the one you thought was “The One” turns out to not be.

About the Author:

Joel Libava

Guest Blogger

The Franchise King®, Joel Libava, is the author of Become a Franchise Owner! and is a franchise ownership advisor. He shows people how to carefully choose and properly research franchises.   

Comments:

Talking with an advisor can help align one's personal goals with the best tax strategies for that person and many find it is well worth it.
During this entire time you will be spending a lot of your time and money getting your business set up
What a wonderful program. Thank you for the summary and sharing more of your own thoughts on this count.
Thank you for these helpful tips, especially the difference between LLC vs S Corp vs C Corp. Talking with an advisor can help align one's personal goals with the best tax strategies for that person and many find it is well worth it.
Nice article Joel. I can speak from experience here as back in July I purchased a fast food franchise. I’m in the early stages of locating a location for my store and some advice I would give to potential franchisee's that dovetails with some of your advice is as follows: * Lending to your comment- “it has to feel right”; Jumping from a work environment under the shelter of an employer for the past 30+ years to becoming self-employed takes guts and is a risk. To help cope with the risk you have to select a franchise that offers a product or service you believe in and have a passion for. I feel this is critical. The most valuable research I conducted during the evaluation process was interviewing existing franchisees that have traveled the same path. They are a wealth of information, provide very good advice and will provide insight as to what's required to be successful so you can gauge if you have the core competencies of what it will take to be successful. Be ready to take a lot of “bad with the good” - As you go through your start up you will encounter a number of ups and downs (in my case many downs). Be patient but persistent and maintain a professional image through it all. During this entire time you will be spending a lot of your time and money getting your business set up. As a motivator maintain a vision of what your business will look like when you reach that finish line – the day you open for business. Good Luck!
I am hoping to pool all my resource to help me through the lending process as well As start-up ongoing training to grow my business
getting franchise would be the easiest strategy to kick off career, as usage of online has given plenty of solution to examine & check out every possible details. Also Govt. is giving every opportunity to grow & rise, even when the situation are not optimum.
I totally agree to the fact that without research work one cannot be enlightened towards the role of a franchise. Using self instincts are smart ways to know what exactly is taking place in market & how a new role can be so effective.
nicely done. like details after Tip not just repeating the same thing in different tone.
Hey great information. We are an international company and considering our options in setting up health & beauty spas in USA and considering our options to support the distribution of our collagen products there in the competitive USA market place, so this info is timely.

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