How to Choose a Franchise that’s Right for You5 ways to make sure a franchise will give you what you're looking for.
If you’re looking to buy a franchise, you’re going to do your due diligence to make sure it’s is a good financial investment. But you should also make sure it’s a good fit for you, personally.
If you’re a rule follower, a good communicator and a team player, you probably have the right personality to operate a franchise. But every franchise is different. Here are five ways to make sure a franchise is going to give you what you’re looking for, from company support to company culture.
Find out if your values align
Even though buying a franchise may be less risky than starting a business from scratch, you’ll still be making a major financial investment and spending much of your time getting your franchise off the ground. So you have to believe in what you’re doing to succeed, said James Alisch, managing director of Wow 1 Day Painting, a home painting franchise with about 40 locations in the U.S. and Canada.
Alisch said to ask yourself three questions: Do you believe in the brand? What makes you excited about it? And why are you committed to it?
“These answers should trump what the franchise is or what it is selling,” he said. Once you know your values align with the brand, “look for that same alignment with corporate leadership and the brand’s focus on customers, systems and strategies.”
Talk to other franchisees
In evaluating a franchise, the most important step is validation, whereby you vet the company by talking to other current franchisees, said Jane Stein, a franchise consultant with Your Franchise Is Waiting and author of “The Girlfriends Guide to Franchising” workshop series.
Call at least seven to 10 existing owners (you can find contact information in the franchise disclosure document) and ask if you can pick their brains for half an hour. A franchisor will likely try to steer you to successful owners, which is a good place to start, Stein said, but you should also select a few owners at random.
“This is where you will unfortunately rule out a lot of brands that you might have been pretty excited about up until this step,” she said.
There are many questions to ask, but Joshua Logan, an attorney practicing franchise law at Achieve Legal in Orlando, Florida, said a helpful one, especially if a franchise is new or small, is, “What was the most challenging situation you faced and how did the franchisor help you address it?”
“You want a franchisor who is going to back you up and help you grow rather than try to shut you down and not want to be bothered,” Logan said.
This is also your opportunity to make sure what the franchisor is telling you checks out, and that you’re getting consistent information.
“If the franchisor’s answers to questions don’t match the franchisees’ answers, it may be because the franchisor is focused too much on selling franchises and is not giving you the clear picture of the franchise system,” Logan said. “Or it could mean that there is a disconnect in perception of reality between franchisor and franchisees — and that’s a bad sign.”
Can you afford it?
Your dream franchise also needs to be one you can afford. Stein said the franchise disclosure document can be a resource again because it shows the range of total startup costs for a franchisee (check item number seven in the document for this).
Once you have an idea of the costs, you can start researching funding options and/or whether you’ve saved enough to cover the startup costs, plus living expenses, while the business gets off the ground.
“As a general rule, I would not want to see anyone invest in a business where the total startup costs will exceed 50 percent of their net worth,” she said. “But many successful (and confident) business owners threw every last dollar into their business and work like their life depends on it to make it go.”
Evaluate the quality of life
Beyond believing in the product and hearing great things from other franchisees, the other important thing to assess is the company culture and lifestyle. How many hours and days will you be working? Are you expected to be on site all the time? Is it hands on or hands off?
Most franchises are set up either as owner-operator franchises or executive franchises. For the former, the franchisee is expected to be part of the day-to-day operations. For the latter, the franchisee hires managers to oversee operations and typically isn’t present at the business. Depending on your goals, you’ll want to make sure the franchise is set up in your preferred form of management.
“Ask, ‘Are franchisees expected to be day-to-day, totally involved managers, or is it preferred to operate more as a CEO and direct managers to be the hands-on leaders day-to-day?’” Logan advised. “This question will give you some more insight on the lifestyle of the franchisee.”
“I once heard a shoe store franchisor tell potential franchisees that there would be days the franchisees would do almost nothing but touch sweaty, smelly feet,” he said. “A franchisor that tells you the less flattering aspects of the business is more likely to want a long-term business partner. This is not a franchisor that is trying grow at all costs.”
Meet the management team
Stein advises her clients to always meet the franchise’s management team prior to deciding whether to buy.
“As much as you liked or didn’t like your franchise development contact up until now, he/she has been your only contact,” Stein said. “You will want to meet the actual operations people that you’ll be dealing with on a daily basis once you are an owner. Be sure you feel good about them.”