The first part of the franchise research process is to conduct a brief self-assessment of your personal strengths, weaknesses, likes, dislikes and resources. These psycho-social dimensions can guide you through the many decisions you'll face in the franchise evaluation process. Without these personal signposts, it's easy to lose your way.
Here are some questions you might want to ask yourself:
- What types of businesses excite you?
- What's your entrepreneurial fantasy?
- Do you imagine yourself dealing with long lines of retail customers, all waving $1,000 bills?
- Or do you see yourself dealing at the business-to-business level, taking calls from Microsoft and Nordstrom?
- Are you working outside in the fresh air, or is your idea of heaven found in the dusty inner workings of a computer?
- Do you see yourself working at home, near your family?
- Are you working part time, or do you plan on this being a full-time career position?
Check your investment resources. List them on paper. Note liquid resources, your cash on hand, savings and that rainy-day cookie jar of $5 bills you buried in the backyard. What other personal resources can you scare up? If your Aunt Gertrude once offered to help you get started in business, now is the time to talk to her. If your bookworm sister just aced Regis Philbin out of $1 million on national television, maybe now is the time to talk business loan (if she says no, you have the perfect response: "Is that your final answer?"). Do you have equity in your house or other assets that can be pledged for a loan? Write them down. Expect to call on virtually all your personal financial resources when you purchase a franchised business.
Knowing your resources saves you considerable time when narrowing down choices in a franchise investment.
Investigating Your Options
Once you've decided a franchise is the right route for you, how do you choose the right franchise? With so many franchise systems to choose from, the options can be dizzying. Start by investigating various industries that interest you to find those with growth potential. Narrow the choices down to a few industries you are most interested in, then analyze your geographic area to see if there is a market for that type of business. If so, contact all the franchise companies in those fields and ask them for information. Any reputable company will be happy to send you information at no cost.
Of course, don't rely solely on these promotional materials to make your decision. You also need to do your own detective work. Start by visiting your library or going online to look up all the magazine and newspaper articles you can find about the company you're considering. Is the company depicted favorably? Does it seem to be well managed and growing?
Check with the consumer or franchise regulators in your state to see if there are any serious problems with the company you're considering. If the company or its principles have been involved in lawsuits or bankruptcies, try to determine the nature of the lawsuits: Did they involve fraud or violations of FTC regulatory laws? To find out, call the court that handled the case and request a copy of the petition or judgment.
If you live in one of the 15 states that regulate the sale of franchises, contact the state franchise authority, which can tell you if the company has complied with the state registration requirements. If the company is registered with Dun & Bradstreet, request a D&B report, which will give you details on the company's financial standing, payment promptness and other information. And of course, it never hurts to check with your local office of the Better Business Bureau for complaints against the company.
Attending a Trade Show
Now that you've got an idea of the industry you're interested in and the financial requirement you can commit to, try visiting a franchise trade show. They're a terrific way to gather a lot of preliminary information and survey the field in a short period of time, and you can find them in most good-sized cities.
When attending a franchise trade show, keep a few thoughts in mind. First, remember the companies exhibiting at the show by no means make up the entire universe of franchise opportunities. In fact, these events showcase only a small selection of the available franchise programs. Second, you should take full advantage of the information available. Stop by the booths of all the companies that fit the business profile you outlined in your goal--planning sessions. Leave your name and address with those companies that interest you. Ask questions, and listen carefully to the answers. Gather handouts and take notes. You'll get a good feel for franchise discourse, the questions to ask and the key sales points in any program.
Use this guide to help you make the best of your franchise trade show visit.
Before the Show:
- Think about what you're seeking from a franchise. Part time or full time? What type of business would you enjoy? Consider your hobbies and passions.
- Figure out your financial resources. What is liquid, what can you borrow from family and friends, and how much do you need to live on? What are your financial goals for the business?
- Get serious. Dress conservatively, carry a briefcase, leave the kids at home, and take business cards if you have them. Show the representatives you meet that you're a serious prospect.
At the Show:
- When you arrive, study the floor plan of the exhibitors listed. Circle the businesses you recognize or that look interesting to you. Make sure you stop by these booths during your visit.
- Don't waste time. Pass by the sellers who are out of your price range or don't meet your personal goals. Have a short list of questions ready to ask the others: 1. What is the total investment required? 2. Tell me about a franchisee's typical day. 3. What arrangements are made for product supply? 4. Is financing available from the franchisor? 5. Ask for a copy of the company's FDD. Not all franchisors will give you a copy of the FDD at the show. This is perfectly acceptable, but if you're serious about investigating an opportunity, insist on a copy as soon as possible.
- Collect handout information from all the companies that interest you. Also gather business cards.
After the Show:
- Organize the materials you collected into file folders. Then read through the information more closely.
- Follow up. Call the representatives you met to set up meetings and gather more information.
As you continue your search for the perfect franchise, check out the resources below to help you find more information on the opportunities that interest you:
- Franchise 500
- Fastest-Growing Franchises
- Top New Franchises
- Top 101 Homebased Franchises
- Top Global Franchises
- Top Low-Cost Franchises
- American Association of Franchisees and Dealers. A national nonprofit trade organization representing the rights and interests of franchisees and independent dealers throughout the United States.
- Canadian Franchise Association. This association represents more than 500 franchise companies throughout Canada.
- International Franchise Association. The IFA is a membership organization of franchisors, franchisees and suppliers.
- American Bar Association Forum on Franchising. Find information here concerning the forum, its programs and publications.
- FTC Franchise & Business Opportunities. Get information here regarding franchise law, as well as tips on business scams.
Source: The Small Business Encyclopedia, Start Your Own Business, Entrepreneur magazine and Entrepreneur's StartUps magazine.
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