How to Buy a Franchise: 5 Steps to Franchise Ownership
Deciding what you want from franchise ownership is the first step you take in your journey to independence...
Becoming a franchise owner can be a rewarding decision if you connect with an opportunity that best matches your priorities. Whether you are looking for greater income control, have more discretion with your leisure time or fulfil the dream of entrepreneurship, there are franchise options to suit.
Deciding what you want from franchise ownership is the first step you take in deciding how to buy a franchise that is going to give you a lifestyle you will enjoy.
Step 1: Knowing what you want
You may have an idea of the kind of business you want to pursue, but before you research brands, start with what you personally want to achieve. Do you want to work the business yourself or will you hire someone to manage it for you? Are you looking to have evenings and weekends off? Is your first franchise a step to becoming a multi-unit owner? Is there a certain income you want to earn as a minimum?
When you decide on a franchise you will be agreeing to a five or 10-year commitment (or more) so a bit of long-term planning will help you choose a franchise more easily as you go through the process.
Step 2: Assessing your financial picture
Franchises come with different levels of financial commitment in the initial fee and with ongoing royalties. You need to be able to support those fees comfortably, especially when you are in the early stages of the business. It can be helpful to get some advice on how much money you are willing to commit to a franchise and how you will finance the business (whether you will need a loan or use your savings.)
Being financially comfortable is a critical aspect of being in business, especially with the demands of getting started in your first year. Not having to worry about finances will make your transition to franchise ownership much less stressful than if you are constantly checking the bank account.
Step 3: Researching franchise opportunities
In addition to choosing a franchise that piques your interest, consider whether there is demand in your area for this kind of business. You will always have competition, and the key is deciding if you can carve out a niche in the marketplace to still be successful.
The training and support provided by the franchisor can help with this part of the decision. While you will bring your own skills to the business, you need adequate time to learn the operations model and feel comfortable running all aspects of the business. You may not do all the jobs in the business, but you need to know how they are done so you can train others.
Of course, the financial commitment of the franchise is a key factor to make sure it aligns with what you can afford. Here are some resources to help with your research:
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Franchise expos. These events allow you to interact with franchisors, ask questions and learn more about their opportunities.
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Franchise associations. The International Franchise Association (IFA) has a helpful document on
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that can explain some franchising terms and situations that can factor into your decision-making.
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Additional resources. As a franchise consulting company, we have a
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you can explore as well.
Step 4: Narrowing down the search
Once you have narrowed your choices, the next step is to review the franchise disclosure document (FDD). This is a legal document that explains the franchisee-franchisor relationship in terms of what is expected from both parties including fees, financial information and training support. There are 23 elements of an FDD that franchisors must provide once they have received your application.
Reviewing the FDD with a lawyer can give you a thorough understanding of the business relationship and the responsibilities of both parties.
Step 5: Consider using a franchise consultant
Throughout this article, we have referenced the value of using financial and legal professionals to advise you on becoming a franchise owner. Franchise consultants are another advisory service available to you.
Franchisors engage franchise consultants to help recruit franchisees. Our role is to meet with people who are interested in owning a franchise, go over the details from the franchises on our schedule and be that initial point of contact for a potential franchisee with respect to their questions and providing information.
Franchise consultants are paid by the franchisor so there is no cost to benefit from their services. Whether you go with a franchise opportunity that a consultant represents or not, you will learn more about matching to the right kind of franchise from people who do this for a living; invaluable information when considering the commitment to investing in a franchise.
Request a consultation with Franchise Consulting Company when you're ready to explore how to buy a franchise that's right for you.
