Willing to forego some creative freedom and executive control in exchange for a proven turnkey business model that may be highly profitable? If so, becoming a franchisee could be a great move. Consider that nearly 8 million Americans work for franchise businesses that pump more than $800 billion into the economy.
But with so many choices available and multiple variables at play, choosing the right franchise can be difficult. To help guide your decision, we asked a group of experts for their recommendations.
[Read: The Definitive Guide to Writing a Startup Business Plan.]
Shop around
With thousands of established franchises to select from, where does an entrepreneur start their journey? The answer is simple: tradeshows and expos, said Austin Titus, director of Franchise Development for United Franchise Group.
“Take the time to attend franchise expos [and] tradeshows to meet franchisors and franchisees. When you meet a company at a tradeshow, you’ll get a sense of their culture, how the company is run and organized, and an overall first impression,” said Titus. “You can ask questions face to face and weed out the best options faster.”
In addition, prepare for some cold calling.
“Phone existing franchisees that own the types of businesses you’re interested in and ask them plenty of questions. You want to hear firsthand about their experiences. It pays to talk to fellow small business owners who have experience in franchising,” he added.
While crunching the numbers is important, remember that a franchise system worth buying into will also provide brand recognition and buying power and help you develop a business strategy, Titus said.
[Read: Everything You Need to Know to Prepare to Apply for a Business Loan.]
Ask the franchisor about anything you aren’t sure about, including their onboarding process and system infrastructure.
Neal Courtney, CEO of Cookie Cutters Haircuts for Kids
Rule out franchises that don’t align with your vision
Pamela Maxwell became a franchisee with Kiddie Academy, an educational childcare center, in 2007. A few years later, she was awarded Franchisee of the Year by the parent company. Her advice? Pick a franchise business that offers goods or services you’re passionate about and that harmonize with your values. After all, you want to feel good about the kind of company you’re buying into.
“You can narrow down your prospects by asking crucial questions,” she said. “Do the philosophies of the franchise company align with yours? Do you see the franchise company as a partner? Do you relate to members of that franchise community? Can they help you achieve success in my industry now and in the future? And do you have faith that the franchisor will continue to be a helpful resource after you’ve achieved success?”
If the answers to these queries are “yes,” then you’ve likely selected the right franchise partner for you, Maxwell said.
“I had a desire to make moms like me feel really confident about where they brought their children for daycare. So it was vital that I find a franchise that put my interests, skills and experiences to good work. Asking the right questions helped me find the right fit.”
[Read: 6 Essential Steps to Creating a Brilliant Social Media Marketing Strategy.]
Know where to turn for help
It’s natural to feel a bit overwhelmed when pondering the purchase of a franchise. Fortunately, “there’s an entire industry of professionals who can work with you, as well as a network of resources available, so you can better understand the process,” said Neal Courtney, CEO of Cookie Cutters Haircuts for Kids, a children’s haircutting franchisor.
Prior to purchasing a franchise, Courtney suggested speaking with an attorney and franchise broker about any important papers you need to sign, including the franchise disclosure documents. It’s also a good idea to consult with an accountant and/or tax planner to better understand the costs involved, tax ramifications and write-offs you may be eligible for, including deductions for franchise fees, business travel and some fringe benefits.
Don’t forget about the parent company, either.
“Ask the franchisor about anything you aren’t sure about, including their onboarding process and system infrastructure,” said Courtney. “The majority of franchisors have developed strong training programs and spend lots of time working with franchisees to ensure that their systems are properly implemented and that the location can start smoothly.”
If you need to secure a loan, there are traditional loan sources that can help if you have a solid credit rating and strong business plan. Or you can look into a loan backed by the Small Business Administration, he said.
Also, consider joining a membership organization like the International Franchise Association or American Association of Franchisees and Dealers, which may offer benefits like continuing education, professional development services, supplier directories, legislative advocacy and discounts.
CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.
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