Franchising’s greatest appeal is the experience of becoming an entrepreneur without taking the risk of going it alone. So you finally decided to go for it. Which franchise should you choose? Back in 2008, when the US suffered its recession, franchising somehow saw growth. Jeff Elgin discussed choosing a best-fit and recession-proof franchise. Much of his advice still holds true today. Potential franchisees need to do extensive research and self-evaluation when deciding which franchise to pursue. They also need to be realistic and understand what they can afford and which business will earn them revenue.
Following are questions to ask when selecting your ideal franchise.
First, you need to look towards yourself. What are you looking to achieve?
1. What are you good at? This includes your skills, knowledge, and experience.
2. What are your interests? Food, sports, clothing, etc.
3. What hours do you want to work? Restaurants and shops may require you to work weekends or late at night. Tax firms provide more weekday, 9-5 hours.
4. Where do you want to live and work? Owning a surf store in Montana is not going to work out. Likewise, neither will a winter gear store in the Nevada desert. The product or service you sell will have to meet the demands of your area to be successful.
5. Do you have an exit plan? If so, what is it?
Now that you know what your personal goals are, what can you realistically afford?
6. How much can you afford to invest?
7. Do you have the money or will you need to finance?
8. What returns do you need? Both in terms of survival and desired income.
9. How much money is available to you? Will you use a standard bank loan or some other financing option? How much money will you receive and how much will you have to invest personally? (Some potential financing options.)
Use your self-evaluation to narrow down your ideal industries.
10. Which industry fits your needs? Entrepreneur’s Franchise 500 list sorts the industries into categories. This can help you get an idea of the different franchise industries, and which line up to your skills and interests.
Now that you have a list of possible industries, understand what they’re future looks like.
11. What does the future of the industry look like? What are the industry trends? Is the industry growing or slowing down?
12. Is the industry overly-saturated?
13. How do changes to the economy affect this industry? How much is this industry affected by economic changes? Haircuts, for example, are always a necessity and pretty resilient.
After narrowing your preferred industries, use your industry preferences, and your self-evaluation and financing responses to find your ideal company.
14. Is it in one of your ideal industries?
15. Can you afford it? Look at money you carry personally and the financing options available to you.
16. Is there a need for the franchise in your desired location?
17. What resources would be provided to you as a franchisee?
18. What does the future look like for this particular franchise? Is the company growing? Slowing down? Does it have a stable future or is it more of a risk?
19. Is the franchise itself overly-saturated? Subway, McDonald’s, even Starbucks, are all overly saturated in the US. It may not be a deal-breaker, but you should think twice before moving forward. If you choose to move forward, make sure there is a need for it in the region you select.
Narrow Your List of Potential Franchises
You now have a list of potential franchises, narrow it further, because research can be extensive.
20. Request preliminary information. Does it still meet your criteria?
21. Carefully review the Franchise Disclosure Document (FDD). Are you still interested? The FDD includes:
- History of the executives
- Litigation the company has experienced
- Contact information of current franchisees
- Copy of a franchise contract
Questions to Ask Current Franchisees
The FDD will give you the information of current franchisees. Reach out to them to find out the franchisee’s perspective.
22. What is the company like? How would they describe the company? Learn some additional background and details of the franchise.
23. What is your life like as a franchisee? Is the work really hands-on? What are their daily responsibilities/schedules?
24. What do you think of the company’s resources? Are they adequate? Is anything unclear? Do they need more support?
25. How realistic are the startup costs? The franchise will advertise a certain startup cost, but are there any hidden costs? What else did franchisees have to invest to get started?
26. How effective are the marketing materials?
27. Do most of the franchisees have a positive outlook of the company? If many of the franchisees don’t seem happy, it’s not a good sign.
When you have an idea of which business you’d like to pursue, visit the company’s headquarters.
28. What additional questions do you have about the business? Be sure to ask during your visit.
29. What is the staff like?
30. Do you feel comfortable investing in this franchise?
Pick a Franchise
Use your complete evaluation to decide if this franchise is a best match. Does the business meet your personal and financial criteria? Is it in your ideal industry and does the franchise have a positive future? Do they provide adequate resources and are franchisees happy? You have to feel confident in your franchise selection. Answering the above criteria will help put your mind at ease when committing to a business.
Potential franchisee? Also read: 5 Top Reasons to Buy a Franchise