Buying a franchise is a safe way to exercise your entrepreneurial muscles on a proven business model – if you choose the right one, that is. If you do, you'll reap the benefits, which include:
- Reduced risk
- Access to instant customers and branding
- Unprecedented product research and group buying power
- Free marketing, courtesy of corporate advertising campaigns
- Dedicated financial and managerial support
Examine your income and interestsPotential franchisees must understand their interests — in order to select a concept that will excite them — as well as their finances. Consider your credit score, net worth and liquid assets in deciding whether you can afford to buy a particular franchise.
U.S. Small Business Administration (SBA), which also offers a franchise registry that helps streamline the loan application process for potential franchisees.
Research your optionsEven if you have a particular franchise in mind when you start your search, you should be aware that there are hundreds of options on the franchise market. Consider your target market and geography to narrow down your choices to those that will best flourish in your community.
Review the UFOCPerhaps the biggest challenge — and most important step — of researching franchise opportunities is collecting information about potential franchisors. Lucky for franchisees, the government requires franchisors to make available certain investment information, distributed in the form of a document called a Uniform Franchise Offering Circular (UFOC).
Consult other franchiseesBefore committing yourself to a particular concept, be sure to ask current franchisees about their experiences.
Make a decisionOnce you've selected a franchise, arrange to meet the franchisor in person. Obtain a franchise application and be sure to go over any last-minute concerns with your attorney. If you reject the franchise, start the process over again!
- Keep in mind that service franchises tend to be a harder sell among customers than product franchises, and are often harder to support due to their limited size and market.
- Beware of franchises that operate corporate units; territory restrictions may apply and oftentimes franchisees end up competing with their corporate counterparts.
- Consider the size of potential franchises; very large ones might be extremely saturated, and might not be able to give you the individual attention you need, while very small ones might still be working out the kinks in their system.