As the economy begins to bounce back from a global depression, more entrepreneurs than ever are looking at their options for buying into a franchise. Franchises offer many of the same benefits as opening a private business, but they will also give you a built-in support system and have a success rate of nearly 90 percent. Here is a look at some tips that you can use to make sure that you buy into the perfect franchise.
Think About Your Goals
Just because a franchise is popular and has good numbers does not necessarily mean that it is the right choice for you. Those that are looking to buy a franchise need to consider what their short and long-term goals will be. Some entrepreneurs want freedom over their schedule or the ability to work within a specific industry while others are just looking for a good investment. Understanding these goals will help you narrow down your choices.
Narrow Down by Location
One of the reasons that nearly 60 percent of small businesses fail within the first five years comes down to opening in the wrong location. You will need to think about variables such as where you are willing to move, the local economy, your pool of potential employees, and any restrictions set by the franchise itself.
Identify Individual Franchises
At this point, it is time to start choosing specific franchises and researching them each independently. It is always a good idea to consider at least a handful of recession-resistant businesses that will not be severely impacted by changes to the global economy. Options such as senior care and fast food are absolute necessities no matter the economy, but expensive boutiques and high-end retailers might not make it through another cyclical recession. Once you have a dozen or so options, you can then contact those franchises directly and ask for preliminary information.
Understanding Information Packets
Franchises will typically send information in the form of brochures and videos, but they might also direct you to a specific website or a trade show. The FTC has created a number of regulations when it comes to what information they must give potential franchise owners. The Franchisor Disclosure Document (FDD) should contain extensive background information on the company, information on all current franchisees, a history of the executives, and any litigation that the company has been a part of.
Visit the Franchisor
The final step before signing the contract is to head to the franchise headquarters and speak with a representative. While this might seem like nothing more than a formality, it is actually a very important step in this process. Potential franchise owners must be completely comfortable with the company that they are going to be a part of. Many franchises also require new owners to go through a training program to learn about the intricacies of day-to-day business. Once this has all been done, the franchise owner can begin the process of setting up their business, hiring employees, and marketing.