Considering franchise ownership? It’s a big decision, one that comes with risks as well as a huge potential upside. Understandably, then, you may have some questions about the best way to proceed — and if so, you’ve come to the right place.
Below, you’ll find everything you need to know about how to buy a franchise, all of it organized around and anchored by three essential steps.
1. Do Your Due Diligence
Opening a franchise is a serious business decision. As such, it requires you to do the necessary due diligence. So start doing research. For example, you might:
- Reach out to other franchisees in the franchise system you’re thinking of joining. Ask them for advice, tips — anything to help clarify your decision. Don’t treat this as a roll of the dice.
- Talk to other business owners in your area. How are they doing? What are their challenges — and where do they see opportunities for growth?
- Audit your finances. How prepared are you really for this investment? How soon will you need to turn a profit in order to remain solvent? It’s always good to be optimistic, but you should prepare with worse-case scenarios in mind, too.
If the franchise you’re interested in has provided you with a Franchise Disclosure Document, it probably includes a list of franchisees you can contact. That’s a wise place to begin. But either way, you should definitely try to contact as many people as you can.
2. Consider the Pros and Cons of Working With a Franchise Broker
One of the tried-and-true approaches that many people take when looking to start a franchise is working with a franchise broker. Franchise brokers are a lot like brokers in other areas: mortgage brokers, stock brokers, yacht brokers — you name it. They’re middlemen who can help guide you through the discovery process of identifying the right franchise opportunity. They’ll likely be able to present you with a series of business concepts that align with your experiences, skills or interests.
Perhaps still more importantly, franchise brokers can help reduce your risk exposure when you’re considering buying a franchise. Why? Because every franchise must report failures, and franchise brokers typically compile these reports to share with prospective new owners. In this way, franchise brokers can make certain you and the franchisor are in alignment about “right-sizing” your investment for both short- and long-term success.
There is one caveat emptor, however: Franchise brokers are like other brokers in another sense, too. Namely, they’re going to charge a fee or even take a cut of the franchise purchase price, which might mean higher entry costs for you as a result. So while these professionals contribute value, reduce risks and can certainly show you how to become a franchise owner, you should keep your own bottom line in mind as well.
3. Lean on Your Contacts and Network
If you’re trying to assess the soundness of a franchise investment, who might know better than the people you know and trust already? Start reaching out to professional consts, business associates and others in your personal and professional network. Ask for feedback, listening and deliberating carefully before acting on their advice. These conversations, even if they’re informal, should help you gather critical insights into local demand for the products or services associated with the franchise you’re interested in buying.
At the end of the day, bear in mind that networking as well as your all-round “people skills” will be important factors in driving the long-range success of your franchise once it gets off the ground. In other words, becoming more active in your local business community, while an important part of the process when you’re considering buying a franchise, is also something that will pay dividends later on. For all of these reasons and more, mobilizing your network and effectively building and fostering relationships is key.
We’ve covered the ins and outs of buying a franchise in this article, starting at the highest level before moving down to granular details. A few key takeaways to keep in mind:
- Do your due diligence. Talk to other franchise owners in your area, and take a deep dive into your own financial health as well.
- Carefully weigh the pros and cons of working with a franchise broker.
- Lean on your existing contacts and professional network for advice.
Finally, you should also think deeply about the level of support that will be available at the franchise you’re buying into. With best--in-class franchise models like Spherion Staffing, for example, you’ll get hands-on training and support, the latest technology resources, marketing collateral and more, all of which can prove critical to your success. Reach out to us to learn more — and get started on your entrepreneurial journey today.