2. INTRODUCTION
Choosing the right franchise to build your
small business around is a big decision that
can greatly influence your personal and
financial well being.
Working as a franchisee for a franchise
means that you are working in partnership
with another business. Different franchises
look for different qualities in their franchisees.
Certain franchise opportunities also provide a
greater level of support.
3. CHOOSING YOUR FRANCHISE
To improve your probability of success,
you must take the time to evaluate
yourself, your strengths and
weaknesses, and, most importantly, the
franchisor and the industry in which it
operates.
The “fit” is critical. Square pegs in round
holes are seldom highly successful–and
often fail.
If you’re not comfortable filling the job
4. There are four main ingredients found in
each business. A quality franchise provides
help in all four areas
1. The product or service that it delivers to
its customers
2. The location that the business occupies
3. The amount of capital that was invested
or borrowed by the venture
4. The management team that runs the
company
5. COST OF THE FRANCHISE
There’s a huge range of costs that make up
the total initial investment. Here’s a list of the
most common
1. Franchise Fee
2. Property Lease
3. Training and Expenses
4. Equipment
5. Initial Merchandise
6. Insurance
7. Additional Fees
6. CRITERIA FOR SELECTING A
FRANCHISE
1. COST
How much money will this franchise cost before it
becomes profitable?
Can I afford to buy this franchise?
Can I make enough money to make the
investment worth my time and energy?
2. ABILITIES
Do you have the technical skills or experience to
manage the franchise?
Do you have the business skills to manage the
franchise?
7. 3. DEMAND
Is there enough demand in your area for the
franchisor's products or services?
Is the demand year-long or seasonal?
Will the demand grow in the future?
Does the product or service generate repeat
business?
4. COMPETITION
How much competition do you have, including other
franchisees?
Are the competing companies/franchises well
established?
Do they offer the same products and services at the
same or lower prices?
Is there a speciality or niche you can capture?
8. 5. BRAND NAME
How well known is the franchise name?
Does it have a reputation for quality?
Have any consumers filed complaints with the local
Better Business Bureau?
6. TRAINING & SUPPORT
What kind and how much training and support does
the franchisor provide?
Do existing franchisees find this level of training and
support adequate?
9. 7. FRANCHISORS EXPERIENCE
Has the franchisor been in business long enough to
have established the type of business strength you
are seeking?
8. EXPANSION PLANS
Is the franchisor planning to grow at a rate that is
sustainable?
10. MAKING A CHOICE
Choosing the right franchise can be a
confusing process.
First, you must believe in the product or
service that the franchise network
delivers
You must verify the industry’s future.
Determine the earnings capability.
You should call them to get their
confirmation of your projections
11. THE FRANCHISE DISCLOSURE
DOCUMENT
The franchise disclosure document is usually
a thick, 50+ page document that seems
imposing. It contains a great amount of
information about the company allowing you
to become familiar with the details of your
future relationship. This document answers
many questions.
Who is the Franchisor?
The principals of the company and their
business background as well as the history of
the venture.
What is the Offering? Exactly what is being
offered? This section describes the length of
the agreement, territory, responsibilities,
12. How Much Will it Cost? Initial fees, royalties,
advertising fees, start-up costs for equipment, and
working capital are covered.
What Does the Company Promise? Will they train?
Develop training materials, ad programs, generate
accounts?
What do you promise? Most franchisors will restrict
your activities to prevent you from using their system
without paying royalties, during and after the
agreement ends.
Financial History of the Franchisor. Is the company
stable? Will they be in business for the long-term?
List of Existing Franchisees. These are the
franchisees you’ll want to call to verify that this is a
venture you’d like to pursue.
A Copy of the License Agreement. This is the actual
13. WHAT TO EXPECT FROM
FRANCHISOR
There are going to be variances from industry to industry
because of the nature of the business.
The bottom line is that you should expect to receive
assistance and expertise for all the factors that are
important in opening a new unit in any franchise.
The following list includes some common areas:
Location assistance
Construction assistance
Marketing assistance
Training-operations
Training-other
The items listed above are just the basics. You will also
need assistance and support in relation to dealing with
governmental agencies for permits and signage.
14. STEPS FOR OPENING A
FRANCHISE
Research the Industry
Submit an Application or Qualification Sheet
Review Disclosure Documents
Develop Questions for the Franchisor
Call or Visit Existing Franchisees
Meet the Franchisor
Choose a Potential Site
Execute the Franchise Agreement
Attend Training
Grand Opening
15. 10 MOST COMMON MISTAKES
MADE BY FRANCHISE BUYERS
A great industry assures your success
I can open my franchise for less than the
franchisor predicts
Bigger is better
Never be the first franchise in a system
There’s no need to hire an Attorney or
Accountant until return from the initial
training
16. I will use about 80% of the Franchisor’s
Business Plan, but I’ll Modify it Enough to
Fit my Style of Management and My Town
All Franchise Systems are About the Same
When You Buy a Franchise, Your Success
is Assured
I’m Sure My Banker Will Lend Me Money
When I Find the Right Franchise
I Know How to Work With and Manage
People
