How to Choose a Franchise Business

Starting a business by buying a franchise is often much easier than getting started from scratch. Companies that sell franchises have already been successful and have developed formulas that can help you be successful too. In order to choose a franchise business, you will need to follow many of the same steps that are necessary for developing any winning business idea.

Difficulty: Moderately Challenging

Instructions

Things You'll Need:

• Spreadsheet software
• Legal advice

1. Set a realistic budget for your franchise investment. This includes the franchise fees, taxes, licenses, payroll and employee benefits, for at least one year. Use the Small Business Association's (SBA) Franchise Registry to find franchisers that have been approved for expedited franchise loan application processing, if you think your budgeted costs require a loan.

2. Look for franchise opportunities that match your personal and financial goals, skills and experience. If the franchise that you choose is not a good fit, you may lose interest and then lose money.

3. Visit the Federal Trade Commission site to get a full understanding of the legal aspects of franchising, a glossary of terms that you will expect to see in the franchise offer and tips on spotting bad investments.

4. Review independent ratings of franchise business opportunities at a trusted site, the International Franchise Association. Use their franchise assessment tool to find out more about opportunities. Get as much information as possible about the franchiser's history, number of franchisees, support provided and the skills needed to run your franchise business using the franchiser's tools and training.

5. Conduct marketing research to determine if the franchise that you are interested in has enough clientele to support your entry into the market. Find our how many franchised or private competing businesses are serving the market that you have targeted.

6. Talk to current and former franchise owners about their experiences with your potential franchiser. Find out if the franchise offerer's program met their expectations. Ask if the franchiser provides free or paid services after the sale is completed that help the franchisee with operations, marketing, sales equipment and financing.

7. Compare potential franchise business opportunities, using a spreadsheet to track expense and income information, along with other data that you find useful. Discuss the franchise disclosure document and contract terms with an attorney. Purchasing a franchise creates a legal obligation that can continue, even if the business fails.

Tips & Warnings

• When considering the purchase of a franchise opportunity, allow as much time as necessary to ask and get answers to all of your questions.
• There are no dumb questions, except the ones you do not ask before it is too late.

Resources

• Get in-depth franchise information at franchise.org.
• Find important legal information about franchising at ftc.gov.
• Find franchisers whose offers are eligible for SBA loans at franchiseregistry.com.

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