Before you buy a franchise, there are several things that you must do. These things are not optional; they’re necessary. If you’d like to improve your odds of success as an owner, follow along.
Top 20 Things To Do Before You Buy A Franchise
1. Be secretive Please don’t tell your friends, relatives, old lovers, etc. what you’re thinking about doing. This will allow you to start with a clean slate-and a clear head.
2. Go deep. Do the Ben Franklin. Get out a piece of paper and a pen. Put a line down the middle of the page. Left side; write down the reasons that you feel you’re ready to become your own boss. On the right-hand side, put down the things that may be cause for concern…now, or at a future time. This little exercise may help put things in perspective. The act of writing it down is really powerful. Try it.
3. Turn it over (The piece of paper.) On the other side, put down all of your professional and personal accomplishments. Don’t be shy. It’s bragging time! Save it for later. This will get you thinking about what you’re really good at…what you’re talents are.
4. Be strong Don’t give in to temptation! (What, Joel?) What I mean is don’t start spending hours and hours online searching for that perfect franchise. It’s not time to do that. Yet. Follow my advice on this one…you’ll be glad you did.
5. Grab your calculator If you don’t know where you stand financially, everything you’ll be doing from this point forward will be a huge waste of time. Spend time gathering specific information. Call your credit card companies, the banks that are holding your mortgages and your car notes, etc. Obtain your balances. Then call your mutual fund companies, or if you use a financial advisor, call him or her, and get your current statements. Expect to be a little crabby when you’re finished with all this. (Not because of how your finances may look.) It’s just that you’re going to experience the joys of corporate phone trees. You’ll be on hold a lot. You’ll hear music in the background that you didn’t even know existed.
6. Ben again Get out a new piece of paper. Now that you have every bit of information concerning your finances, it’s time to calculate your net worth. Draw a line down the middle of the paper. On the left-hand side put down all of your assets. IRA’s, 401 (k)’s, savings accounts, stocks, bonds, your home’s value, basically everything that has worth. On the right-hand side, write down all of your debts. This will include car loans, mortgages, credit card balances…basically whoever you owe money to needs to be shown on this side of your paper. To get your net worth, subtract your debt from your assets. That’s it. Now you know exactly where you stand when you apply for financing.
7. Budgeting for a franchise You’re going to need money of your own to put into the franchise business that you choose. There’s no such thing as a, “no money down” small business loan. Figure that you’ll have to come up with about 30% of the total franchise business investment. For example, if the total investment of a certain franchise is $225,000, which will probably include the franchise fee, equipment, build-out, inventory, and some working capital, you’ll have to have the ability to write a check for around $65,000. I know that you probably don’t know what kind of franchise you’ll end up investing in. Just figure, (for now) that the average total cost of a franchise is $175,000. That means you’ll have to have about $50,000 in liquid assets. Starting Costs Calculator
8. Talents So, what are you really, really good at? Are you a stellar salesperson? Are you a top marketing executive? An amazing operations person? Are you a “numbers” person? Are you great at fixing things? Are you good at coaching and/or training? Go back to your “bragging” sheet. Circle your star qualities. Your top skills. These are things that you’re going to bring to the franchise table.
9. Do you follow them or make them? I’m referring to rules, here. Think back to the last job or jobs you had. Did you follow the rules there? Willingly? Or, were you a bit of a maverick? In other words, do you consider yourself to be a rule follower or a rule maker? Put in another way, are you a lover or a fighter? Lovers generally make good franchise owners. Fighters don’t. Be honest with yourself here.
10. Take The Franchise Quiz I designed a short franchise compatibility quiz, and it’s free. It will allow you to double check #9, above. Take The Franchise Quiz
11. Set sail It’s time to explore the vast world of franchising. Grab your most comfortable pair of sweats, brew some high-test, and start looking around. See what’s available. Go to Google, Bing, MSN, Dogpile, or any other major search engine, and type in these two words; “franchise opportunities.” Fun. Spend a few hours just looking. Don’t fill out any, “request more information” forms yet. Just have some fun. Be loose. Write some of the franchise concepts down that interest you-for whatever reason. This isn’t Decision Day; it’s Exploration Day. So explore.
12. The long list When you’re finished, “exploring” franchise opportunities, (and you’ve written some of the ones down that have peaked your interest) take a deep breath and look at your list. Write down, (next to each one) why it is that you’re interested in them. The reasons don’t really matter yet. You now have a starting point. That’s all you need. You have to start at the beginning, right? You’re there.
13. Whittle It’s now time to whittle away at your list. Grab the sheet of paper that shows what your top skills are. Look at your long list of franchises. Are any of your terrific skills a match for the franchises that you’re interested in? In other words, would your role as The Owner allow you to bring your best skills to the game? Are any of the franchises a match for you-based on what you’re really, really, good at?
14. Don’t Assume In order to make sure that you’ve done #13 correctly, you’ll have to make sure that you actually know what your specific role as The Owner would be. Don’t assume. Don’t guess. And you know what? There’s really only one way to find out what you’d be doing as The Owner; you need to talk with the franchise development person!
15. Request The Info Once you’ve found a few franchises that interest you, and that could match up to what I wrote in #13, it’s okay to ask for a packet of information to be sent your way now. (Gulp.) Did you feel that? That’s right; this is starting to get serious now. You did say that you wanted to “be the boss,” remember? One more thing. Go back 8 spaces. Read #7 one more time. Before you request information from any franchisor, make sure that the total investment amount required is well within your budget. And, don’t even think about searching online for one of those “free grants.” There aren’t any.
16. Converse With Them Once you receive the franchise information packet, which may come via USPS, or electronically in some cases, arrange a call with the franchise development director. (Salesperson.) Do this even if the information that you’ve received is less than exciting. The franchise brochure is not the franchise business. It’s just information. Get involved with a human. Have a conversation about the franchise concept with someone other than yourself. Ask questions. Share your concerns, if you have any. Then decide if you’re still interested. There’s no guessing allowed. Please don’t blow it here. Lots of people do. (Because they guessed.) They never even talked to someone from the company.
17. Be a machine You need to become a FFGM. (A Franchise Fact-Gathering Machine.) Once you feel that you’ve found one or two franchises that make sense for you, it’s time to do your research. Not just anyresearch, though; amazing research. If you really want to lower your financial risk, learn how to do great franchise research. You’re going to need to take the proper Franchise Research Steps.
18. Buy gas Plan on filling up your vehicle’s gas tank once or twice, before you become a franchise owner. That’s because an important part of your franchise research will involve visiting existing franchisees. That’s right; you’re going to impose on a couple of them. But don’t feel guilty about asking one or two of them if you can spend a day in their businesses. Investing in a franchise business of your own is way too big for that. Guilt should never enter the picture. You’ll find that most franchisees are very receptive to it. They get to show off their operation; you get a feel for the business.
19. Leave on a jet plane Visit headquarters. That’s right; if you’re really serious about the franchise opportunity that you’ve been spending day and night learning about, schedule a day-long visit to the nerve center. Not only will you want to have some eye contact with the executives of the franchise company, you’ll also want to try to get a feel of the company culture. (There is going to be one, trust me.) In almost every case,you’ll have to be invited to what’s commonly called The Discovery Day. Don’t be cheap now; spend the money needed to travel to headquarters. Here’s an idea; ask your franchise development person to reimburse you for your expenses if you become an Owner.
20. Lawyer up They did. If you knew how much the franchisor has spent on legal fees to put all of their franchise documents together, your head would spin. You need to hook up with a competent franchise attorney. I don’t mean a business attorney. A franchise attorney. Unless of course you don’t feel that you need to know anything about the FDD. Lots of people don’t use franchise attorney’s to look over their franchise contract. They’re ex-franchisees, now.
That’s it. Those are the Top 20 Things To Do Before You Buy A Franchise. Now, go do it. I know you can.