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6 Franchise Purchasing Tips
6 Franchise Purchasing Tips
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.
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.
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.