Steps to Owning a Franchise
Start the process of exploring franchise opportunities by creating your personal balance sheet, your assets versus your liabilities. You need to know what you can afford, and a franchisor will require applicants to present financial records that meet the company's standards. The initial franchise fee will require cash or the ability to qualify for financing. You will also need operating capital as dictated by the company. It is best to understand your finances before proceeding further.
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Initial Exploration
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Selecting the right franchise to match your skills is critical to your success. The steps to owning any franchise are similar, though some franchises may require specialized knowledge to pursue. After your initial inquiry and discussion with a company representative, you will be asked to fill out an application, including basic financial information, and granting them the right to pull a credit report. Qualified candidates receive a copy of the company's Franchise Disclosure Document (FDD).
Narrowing Down the Opportunities
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Narrowing down the best opportunities for you, based on your skills, interests and financial capabilities requires a significant amount of research. Begin by drafting three lists of skills. First, create a list of skills that you have acquired from your education, business experience and outside interests. The second list includes skills you could easily learn, and the third list includes skills that you are lacking. The FDD will discuss the franchisors training program.
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Conduct Your Due Diligence
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Every FDD includes specific information required about the franchise. This includes information on the company and any predecessors, a history of litigation, the number and locations of existing franchises, the company's financial performance, initial franchise fee, a statement of the franchisee's Initial Investment, company trademarks, service marks, trade names, patents and copyrights, contracts, and more. The recipient must sign and return a receipt for the FDD and must wait at least ten days before signing a franchise agreement.
The Final Steps
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Consult with a franchise attorney for a complete understanding of the FDD. Ask to speak with at least two existing franchise operators. Visit one or more franchises if a brick-and-mortar location is required. Compare the performance of the franchise you are considering with all competitors in your market. Read recent company press releases and read what the outside press is saying about the franchisor. If considering the purchase of an existing franchise unit, do your homework.
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References
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