Surprise! Your franchise research doesn't begin with looking at franchises at all. It begins with a very thorough self-examination, because if we're going to find a franchise that's a good match for you, we're going to have to know a lot more about what you want and what resources you have to work with. The answers are inside you, but they may not be things you have carefully thought through and written down. The effort you put into this first section will save a considerable amount of time later in the process, so take your time and do a great job with these initial steps.
Step 1: We'll begin by answering the most basic question of all: Why do you want to own a franchise? Do you seek the freedom and autonomy of business ownership? Do you see franchising as a way to use your skills and experience to create greater personal wealth than you have been able to earn in corporate America? Do you have specific lifestyle expectations for business ownership? It's essential to have a clear idea of why you want a franchise and what you expect to accomplish by owning and operating one. Write down your answers in detail so you can refer back to them as you progress in your franchise research.
Step 2: Now that you know why you want a business, let's take a moment to make sure a franchise makes sense for you. Most people list the main advantage of a franchise as the reduction of risk, since you should select one with both a proven operational system and a good brand. Keep in mind, though, that there's a trade-off for this increased security. As a franchisee, you're required to operate your business in a specific manner (the proven operational system), and you need to be comfortable with the franchisor basically telling you how you're going to run your business. If you have a stronger entrepreneurial personality and want to innovate and fly by the seat of your pants, a franchise isn't a good choice for you. Before moving on in the process of becoming a franchise owner, make sure you're completely comfortable with the idea of executing someone else's system the way you're told.
Step 3: Let's spend a little time thinking about where you want your business to be located. Do you want to stay right where you are or relocate? If your ideal business is sold out in your first choice of location, will you accept a territory a little farther away? We're not looking for a specific cross street here--just a general market area. Many people find it helpful to determine a maximum driving distance or commute time that will identify potential locations of interest.
Step 4: Now it's time for us to form an opinion about that four-letter word that starts with an "s": sell. In many franchises, the most important role of the franchisee is to hustle up business by selling to customers, so we need to determine where your comfort level is with regard to selling. Some folks are perfectly at ease cold-calling strangers or going door to door to solicit business. Others can't imagine doing any selling, except perhaps helping customers from behind a retail counter. Most fall somewhere in the middle. Rate your comfort level with sales activities on a scale of one to 10.
Step 5: We also need to determine your comfort level with managing employees. Most franchises have employees, but the number and characteristics of the employee base varies considerably. Will you be comfortable managing a large staff, or should you be focused on businesses with very few employees? Does it matter to you whether they're skilled workers vs. unskilled? Many franchises employ significant numbers of unskilled employees and manage in a high-turnover environment--is that a situation you could handle? Do you have any issues with businesses that typically hire young employees or those with a limited ability to communicate in English? This is an important step for you to think through--your answer may eliminate many franchises from your consideration.
Step 6: At this point, it's important to consider lessons from your past work experience and your general thoughts about any status or ego issues that may be related to potential businesses. What work have you liked doing the most and the least in your previous experience? What are your strengths? What are your weaknesses? What types of tasks do you never want to have to do again? What hours of the day and which days of the week do you want to work? Finally, how important is it to you what the neighbors might think? In other words, if you found a business that was perfect in every way in terms of meeting all your goals but it happened to be a service franchise where your employees were involved in cleaning drains, toilets or what have you, would that be an issue? The fact is that a lot of very successful franchises aren't glamorous except in their results, and you need to decide whether to consider such opportunities.
Step 7: It's time to rate your financial situation. Make a list of the current value of all your assets (things you own) and all your liabilities (things you owe). When you subtract the liabilities from the assets, the difference is your net worth. Carrying this process one step further, you need to determine the current value of all your assets that are either cash or can be converted to cash fairly easily (including assets such as stocks and bonds, retirement programs and home equity). This cash or cash-equivalent number is called your liquidity or liquid assets. You'll need to know this and your net worth when buying a franchise.
Step 8: Now it's time to organize the information we've gathered in the preceding steps into a format we can use to evaluate potential opportunities. You need to create a narrative for yourself that defines the most important characteristics you want in a franchise. Take your time on this, because we're going to be referring back to your narrative a number of times, and this is critically important to ensuring that you make a good decision.
Here's a fictitious example of such a narrative: "My ideal franchise would require a total investment of no more than $250,000, with financing available for at least $150,000 of that total. I want my business to be located within 40 miles of my current residence. I am completely comfortable with any level of selling activity required of me to promote the business and with supervising a reasonably small number of employees, as these are the biggest strengths I bring to the business. I am interested in looking into any franchise that meets my financial goals, regardless of its product or service. I am more interested in long-term financial goals than I am in a quick return on my investment, so I can go a year before the business reaches the break-even point, as long I could see a profit of at least $100,000 by the third year. I would be willing to work whatever hours are necessary during the first year, but would like to have the ability to enjoy more time traveling with my family thereafter. Ultimately, I would like to sell my business after about 10 years for a substantial profit and retire from work activities."
Step 9: This one is easy--or is it? Step 9 is to keep an open mind. Our goal here is to try to find the franchise that's perfect for you out of thousands of possibilities. You've taken the time in Step 8 to consider and list the characteristics that define this perfect match for you. You need to make sure you don't let any preconceived notions or prejudices steer you toward some concept that doesn't match your list or turn you away from some concept that does. Congratulations! You've completed what for many is the most difficult part of the franchise selection process--though undoubtedly the most important. Now it's time to get busy narrowing down those thousands of companies into a more manageable list of potential opportunities for you.
Jeff Elgin has almost 20 years of experience franchising, both as a franchisee and a senior franchise company executive. He's currently the CEO of FranChoice Inc., a company that provides free consulting to consumers looking for a franchise that best meets their needs.