Many people dream of one day running their own business. However, many have come to realize that building a business from the ground up is a riskier venture than they can handle. If you’re one of these people, then you may be considering a franchise investment instead. Perhaps you’ve done some basic research on the benefits of franchise ownership versus traditional business ownership, and you’re ready to invest. If this is the case, then you should know what the process of buying a franchise entails.
1. Commit to the investment
The first thing you should do is figure out whether buying a franchise is the right move for you. Consider why you want to own a franchise, and whether you’re willing to do what it takes to run one. Go over your personal finances and make sure that your personal life is stable as well. This will make it easier to balance your personal life with work if you make the decision to invest.
2. Begin your research
Once you’ve made a firm commitment to investing in a franchise, begin researching different franchises. There are a number of ways to go about this. First, look into the reputation of the franchisor by going through online customer reviews, checking with the Better Business Bureau, and doing a simple search to find out about any controversies surrounding the company or awards it has received. Don’t forget to look at the website of the franchise. A good franchisor will provide a wealth of information about the franchising opportunities, including the history of the company and the costs of the investment.
3. Submit a request for a franchise application
If you like what you see from the research you’ve done, go to the website of the franchise you’re interested in and submit a request for an application. Fill out and submit the application. They will look over your information in order to determine whether they think you’re a good fit as a franchise owner or not. If they do, they will send you an invitation to attend a discovery day as well as a franchise disclosure document.
4. Read over the franchise disclosure document
Law requires that franchisors send a franchise disclosure document to prospective buyers at least 14 days before they ask them to sign or pay for anything. The document includes information that the franchisor is required to disclose to all prospective investors. This includes their litigation history, the franchise fees, any previous or pending bankruptcies, all fees and expenses, and your obligations as an owner. It’s extremely important that you read over this document thoroughly before signing or agreeing to anything.
5. Attend the franchisor’s discovery day
You don’t have to sign the franchise agreement in order to attend the discovery day, wherein you’ll be invited to the company headquarters. You can learn more about the franchisor, and interview them as well. The impression they leave on you is an important factor in making your decision to invest.
6. Speak with other franchise owners near your
A good franchisor will connect you with other franchisees that are near you. This will give you a chance to speak with them about their experience running the franchise as well as see them at work. This is a good way to get a clear idea of how strong of a relationship the franchisor has with its franchisees and what kind of support they offer. If you have to find another franchise owner to speak to on your own, and you find that they are unhappy with their relationship with their franchisor, consider it a big red flag.
7. Secure the financing necessary for your investment
If you’re satisfied with the impression the franchisor made on you during the discovery day, and you’ve spoken to a franchise owner that convinced you that it’s a good investment, then it’s time to secure financing. There are a number of different ways that you can go about doing this. You can apply for a traditional loan from your bank, apply for a small business loan, or go through the franchisor for financing. Many franchisors offer in-house financing options or have a relationship with a third party that offers financing.
8. Sign and submit your franchise agreement
When you’ve secured your financing, sign the franchise agreement and submit it. If it’s possible, have a lawyer look over the agreement to make sure that you know what it contains.
Once you have submitted your franchise agreement, you’ll be on your way to owning and operating your own franchise. Keep in mind, however, that it’s not as simple as being handed the keys to a store. You most likely will be required to take a one- to two-week course that goes over everything you need to know about the franchise and the products or services you’ll be selling, and to do on-site training at another franchise location. Once you’ve done all this, the franchisor will help you find a location for your store, negotiate your lease, help set the store up, help market your grand opening, and provide general guidance for opening and running your franchise location.
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