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Franchise Buying Guide

Finding the Perfect Opportunity

Owning a franchise or business opportunity is within your reach--it's just a matter of finding the right one.
Presented by Guidant Financial
Guidant Financial specializes in helping entrepreneurs purchase new franchises using their retirement funds.

Your first million may be the hardest to make, but an edge, a system, a method can get you a fair shot at it. Franchising has cleared the path toward your first million. Find a successful franchise concept that's knocking them dead in the marketplace, and buy and build one of your own. Then do it again, and your net worth starts to zoom toward the next seven-digit plateau.

Finding the right system for you will take some research, persistence and franchising street smarts--but you can get there if you take the following steps.

The Right Fit
There's no perfect franchise; there are only franchises that fit perfectly with the franchisee. And it's high time you got away from your singular association of franchising with food establishments. Restaurants have led the way in franchising, no question, but the franchising concept has spread its wings in dozens of other business categories, from specialty product distribution to publishing, from fitness centers to children's parties. The first time you research franchises on the internet, you're confronted with hundreds of opportunities.

Your first job is to sort through your own objectives, personal preferences and resources so you can knowledgeably evaluate the choices. Also, give some thought to what work you would enjoy doing. Do you see yourself dealing directly with the public, working a retail counter or selling services to businesses? Do you dream of owning a restaurant or a commercial cleaning service, or do you live for working on cars or teaching people how to use computers? As daunting as the number of choices may be, franchising presents a remarkable opportunity to find a business you'll love.

Also consider your financial resources. Write down your liquid assets, the assets against which you can borrow money and funds you can scrape together or borrow from friends and family. You need a sense of the level of business investment you can afford. For instance, if you can borrow up to $100,000, that dramatically affects the categories of franchise businesses you can consider. Most leased and built-out retail locations cost $350,000 and up, but you can operate scores of franchise businesses in your investment range from home. Think hard about these issues and start to close in on the challenge of finding the perfect fit--the real key to making your first million.

One practical way to approach the franchise market is to attend a franchise and business opportunity trade show. These shows rotate through most major cities and are well worth your time and effort. Dress in business casual attire, take personal business cards and talk to representatives of the franchises you think you might enjoy. Have a series of questions ready to go with each booth. (What is the total investment range? Do they provide any financing directly to franchisees? How well-developed is the system in this market?) Let the reps know you're a serious prospect (they get more than their fair share of dreamers), and that you'd appreciate detailed follow-up information.

Protecting Your Investment
If you don't proceed with caution, you'll not only fumble your best shot at your first million, but you'll also unnecessarily risk your entire investment. State and federal franchising laws provide limited protection of your investment, but nothing protects your money like taking a few steps to check out the franchisor and the track record of the franchise program over the past few years.

The Federal Trade Commission regulates franchise sales nationwide and requires franchisors to provide you with an offering prospectus (also called a franchise disclosure document, Uniform Franchise Offering Circular or UFOC) at least 10 business days be-fore you sign a binding franchise contract or pay money to the company. No central registration of UFOCs is required by the FTC rule--this is simply a disclosure requirement.

Several states also regulate franchise sales, and they go further than the FTC rule by requiring franchisors to go through a registration process, have their UFOCs reviewed by state examiners and renew their registrations annually. The franchise registration states are California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Rhode Island, South Dakota, Virginia, Washington and Wisconsin. If you live in one of these states, you enjoy slightly better protection from a fraudulent or merely weak franchise offering.

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This article was originally published in the October 2006 print edition of Entrepreneur's StartUps with the headline: Perfect Match.

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