Are You Ready to Be a Franchisee?
Our experts reveal everything you can do to improve your chances for success <I>before</I> you buy a franchise.
Q: I am looking to buy a franchise and have just begun to investigate several opportunities. I have set a deadline of March 1st to make a decision as to which franchise to buy. However, I am wondering whether there's anything I can do as part of my research that will better prepare me to start my business once I've decided to buy.
A: Absolutely. There are several things you can do which will not only pave the way for a smooth and efficient start to your business, but that may also affect your final decision on which franchise to buy.
If you plan to finance your start-up costs with a bank loan, you would be wise to begin by building a relationship with your banker. Most banks have a small-business loan department. Stop by and introduce yourself. Ask what their criteria are for approving a loan for a franchised business and what they will require from you in your loan application. Getting to know your banker at an early date should speed the loan process once you've decided on a franchise.
Finding the proper real estate is often the biggest determent to opening a business. Franchisors should provide you with some broad guidelines for the type of facilities required for their concept. And, especially if you're thinking about a food or retail-related concept, it isn't too early to begin scouting locations and establishing a relationship with a commercial real estate broker. Of course, you shouldn't commit to a lease until you've signed your franchise agreement.
Getting the proper professional guidance will be important as you evaluate franchise opportunities and throughout the life of your business. You should begin to research and interview advisors to find professionals who are competent in their field and with whom you can establish a personal rapport. If you don't already have a relationship with an accountant, ask friends and business associates whom they use and recommend. A list of attorneys who specialize in franchising can be obtained from the International Franchise Association (202-628-8000) or your state bar association. Selecting an attorney with franchise experience will speed up the review of your franchise agreement, as these attorneys know what is acceptable in such agreements and won't try to negotiate the nonnegotiable.
If you're not already computer literate, take a class in the basics. Most franchise systems today use computers in one capacity or another, and you may be totally lost if you "can't find the on button." A word of caution: Many franchisors specify the system you need for the operation of their concept, so put off actually purchasing a new system until you have decided on a franchise.
Likewise, if your career to date has been in a specialized area of business (e.g., accounting, human resources, marketing, sales, etc.) and this franchise is your first venture into owning your own business, you'll find your new life requires you to be more of a jack of all trades. If you feel you're weak in any areas of business management, now is the time to take a class or visit the library and do a little studying. Once you decide on a concept, your time will be consumed with getting your business started. And while franchisors do provide training, their training programs are designed to teach you their system. For example, your franchisor will train you in their chart of accounts, financial reporting forms, cost structures and pricing techniques, etc. They will not teach you how to be an accountant.
In short, now is exactly the right time to do some general preparation and lay the groundwork for a successful launch to your franchise.
Michael H. Seid is managing director of Michael H. Seid & Associates, a West Hartford, Connecticut- and Troy, Michigan-based management consulting firm specializing in the franchise industry. Seid co-wrote Franchising for Dummies (IDG Books) with Dave Thomas, the late founder of Wendy's, and serves on the International Franchise Association's Board of Directors.
Kay Marie Ainsley, managing director of Michael H. Seid & Associates, consults with companies on the appropriateness of franchising; assists franchisors with systems, manuals and training programs; and is a frequent speaker and author of numerous articles on franchising.
The opinions expressed in this column are those of the author, not of Entrepreneur.com. All answers are intended to be general in nature, without regard to specific geographical areas or circumstances, and should only be relied upon after consulting an appropriate expert, such as an attorney or accountant.