By doing thorough due diligence and working with a professional Franchise Consultant you can avoid many of the mistakes of a first time franchise buyer.
POST WRITTEN BYDon DaszkowskiDon Daszkowski is the Founder of IFPG. IFPG trains individuals to become Certified Franchise Consultants and earn money selling franchises. Published in Forbes on Apr 13/2000
Which is the best franchise to buy right now? If I had a dollar for every time someone asked me this I would have a lot of extra cash. This is not the way to go about buying a franchise. Typically this is the worst way. The “best franchise to buy” often is a fad and could be the next business model to cannibalize itself.
I’m not saying you shouldn’t buy a franchise; I’m asking you to do your homework or enlist the services of an expert. Most people are aware of the advantages of investing in a franchise rather than starting a business from scratch. With a proven system in place, running a franchise is pretty much plug and play, right? Well, that is not always the case, and many aspiring business owners have been burned by not doing their due diligence.
You really have to make sure you know your stuff, and you might want to consider working with a franchise consultant. They can help you to navigate the process and possibly avoid mistakes along the way when it comes to choice, funding and more. The last thing you want is to invest in a business that you don’t really like, can’t manage or can’t afford.
Just like with real estate agents, the franchise consultant’s services are free to franchise buyers. Franchisors happily pay the consultant’s commission for delivering the best-suited candidates. Here are five tips to help franchise buyers make the right choice, and how an expert can help.
1. Don’t limit your options.
There’s no worse feeling than buyer’s remorse. The last thing you want is to jump too quickly on an opportunity and then, when it’s too late, learn about a different franchise that might have been a better choice. Say you’ve spent your career in education. It may seem natural to limit your search to educational brands, but you’ll be missing out if that’s where you stop. The beauty of franchising is that you can move into a completely different industry and still play on your skills to be successful.
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An expert can help you find franchise options you may have never considered. For example, an accountant may find that running a painting franchise is a refreshing change from sitting behind a desk all day. He can still use his accounting skills to run the business, but now he can spend part of his day on the road interacting with his team and clients. A teacher may still want to work with kids, but also has a passion for fitness. A kid’s fitness program could combine both her interests and fit better with her schedule.
2. Don’t choose a bad match.
Many people have learned too late that their skill set isn’t a good fit for the franchise they chose. A financial consulting franchise, for example, may require you to build relationships in your area to get business. While relationship-building might sound easy enough, it’s often another way to say “sales and networking.” Not everyone is comfortable with or good at selling. So, if the success of a business depends on certain soft skills, you’ll want to know the specifics before signing on.
Make sure the franchise consultant you work with knows you — and the franchise — well enough to determine if you are a good fit. Although most franchisors vet potential franchisees, they generally don’t do the comprehensive testing that consultants do. Your consultant should employ proven methods to understand what you’re all about. They’ll make sure they get to know your personality, strengths, weaknesses and motivations. Based on the information they gather, they’ll help determine if you’re suitable for a brand.
3. Don’t take on more than you can handle.
Unfortunately, some people sign on to a franchise and later find they can’t handle the demands of the business. Some folks have struggled with the loss of income in the first year. Others find the hours too demanding.
An expert should present the negatives as well as the positives, and help you look beyond the basics and determine what the day-to-day realities really look like. Owning a food franchise may seem glamourous, but there can be many downsides, including the hours. Are you okay with missing your son’s baseball games in order to run the business? Do you have enough liquid cash to live comfortably for the first year? These are important questions your consultant should help you answer.
4. Don’t miss crucial steps.
You don’t want to have to kick yourself later for missing crucial steps or not asking the right questions in the buying process. Instead of taking out a loan, maybe you should have considered using retirement funding. You talked to the top-producing franchisee in the system, but did you have calls with any others? Did you carefully review the FDD and understand your operating costs?
From financial to practical considerations, the process can be head-spinning. A franchise consultant should help you navigate these important steps and point you in the right direction to make informed decisions in every area.
5. Look at the big picture.
After two years of owning your burger franchise, you are ready to scale and realize there’s nowhere to go. All the other territories in your area were long gone before you ever signed on and now you wished you went with a more emerging brand.
When buying a franchise you need to look at the big picture. Where will you want to be in five years? Can you scale the business? What is your exit strategy? Will you want to sell the business or keep it in the family? A good franchise consultant will help bring up points you never considered and could help you avoid pitfalls now and for years to come.