How to Select a RTO

Selecting a franchise requires thoughtful consideration and extensive research.

Rent-to-own (RTO) stores provide customers the furniture, appliances and electronic equipment they want in exchange for monthly payments. RTO stores offer name brand merchandise and provide free delivery and service during the rental period. Customers can decide later to purchase the products they rented. Some RTOs are independently owned but most are units of established franchise companies. To purchase and operate an RTO franchise successfully requires careful selection of the franchise company, effective training and adequate financing.

Instructions

1. Visit several RTO franchise stores and inquire about what they like and dislike about the company whose franchise they own. Then contact the franchise company that seems most compatible with the ideas you have about the business and obtain their Franchise Disclosure Document (FDD). Controlled by Federal Trade Commission (FTC) regulations, this document has 23 areas that every franchise company must describe in detail.

2. Study the FDD you obtain from the franchise company you chose until you believe you fully understand the commitments you are undertaking. Consultation with a lawyer could help you avoid problems later. The FDD defines what the franchise company will do for you and what it expects from you. The FTC's protection of the process ends with the completed sale. You must learn the precise details of the geographic area your franchise covers and what other RTOs exist in your area. Some franchisers will work with you through their own sales representative and others through brokerages that sell many different franchises. You will probably never see the brokerage representative again after your purchase.

3. Research the brand name, operating system and training program. Do you expect customers to choose your RTO to rent from because they know the brand? Will being part of this franchise company help you compete in the market place? Will you be a part of an industry expected to grow over the long term? Does the franchise company provide sufficient training and to what extent does it offer continuing support? Does the franchise company provide an operating system that is easy to learn, install and operate?

4. Call several of the company's franchisees that must be identified in the FDD. Ask about problems they encountered getting started and what they did to resolve them. Ask them to tell you what they might do differently if they were starting over.

5. Get as much information about finances as possible. You don't want to be surprised later by costs you didn't plan on. Find out the initial purchase price and inventory costs. Examine all the royalty fees and franchise expenses. How much must you pay into a national marketing budget? How often do you get new marketing materials? Raise the finances needed for starting up and maintenance until profits begin?

References

• SCORE: Selecting the right franchise

Resources

• Colortyme: Franchise opportunities
• Aaron's: Franchise opportunities