Becoming a franchisee is not a small obligation. When you buy into one of the top franchise businesses, you are buying not only a restaurant but a brand as well. The procedures that put the top 10 franchises on the map become your responsibility. It pays to know how to find good franchises to own so that you can make the most of your investment opportunity.
Knowing what to look for in a franchise means also knowing what to look for in yourself. Here are some tips on how to research franchises to own so your investment doesn’t go to waste.
1. Research your area
Looking for the top franchises to buy on Google is a given, but what if not all those franchises are the best pick for you? Just because a franchise has a high national performance doesn’t mean that it will work in your area.
Research what has worked (and more importantly: what has failed) in the area you’re looking to set up a franchise in before making any investment. If there’s another of the same franchises nearby or the area has a history of certain businesses failing, this is information that you can use to make a more informed decision.
For example, Chaps Pit Beef is home to some of the best BBQ in MD, but it’s not a nationally ranking franchise in terms of scope and performance. However, you might be in an area where a barbecue franchise will succeed because it’s different while a top 10 franchise like McDonald’s might fail because there are too many restaurants just like it in the area.
Diligent research can help you make sure that your investment doesn’t go to waste just because of the area you’re in.
2. Plan your finances
A good franchise to own gives you a favorable contract on your brand deal. This won’t happen if you rush your finances or go in underprepared.
The capital required to start a franchise can be sizable and even unpredictable. Buying the license itself could cost $100,000 for one of the larger franchises, another reason you may want to consider a small BBQ franchise over a Wendy’s in an area that might suit it.
Additionally, your franchise may not take off right away (you can only plan for so much!). In that case, it’s essential to have some capital stored away in case you need to give the business a boost until it gets going.
Many budding entrepreneurs think they just have to afford the initial purchase: the license, the building, and the franchise. There’s more to financing this opportunity than that.
3. Scout your location
Not every franchise works in every location, as we discussed. The individual location of your franchise, though, matters on the smallest scale. A corner plot may work for a BBQ franchise and not a McDonald’s – only by doing research can you decide if your specific location warrants such a huge investment in this franchise.
It helps to scout the location yourself to make sure that it’s visible and accessible.
4. Qualities of a good franchise
Knowing how to choose the franchise itself is the biggest hurdle after your finances and pre-planning are in order. What qualities make up a good franchise to own? There are a few things you should look for.
You want a franchisor that has a ton of experience working with franchisees and running successful franchises. Even if they don’t have a ton of success yet in the current franchise, deeper research into the company’s leadership may reveal success with other brands that should give you the confidence you need.
You’re signing into a huge commitment when you become a franchisee. You want to read the franchise disclosure document as thoroughly as you can and get a solid figure in your head of what exactly in real money you’ll be paying to become a franchisee.
You probably want a financial advisor to look over this document and your finances with you to be safe.
In addition, sometimes franchises fail. You want to sign a contract that has exit agreement terms clearly laid out so that you have a way out of a failing franchise. Even though it will still cost you, you need to make sure you can get out of a bad deal and not let your entire financial situation go down with the ship.
Clarity also applies to the business’s training procedures and operation. Does it seem laid out thoughtfully, with a good marketing and training infrastructure? These are things you have to learn how to observe if you want to figure out which franchises are good to own.
5. Ask around
Talking to other franchisees in your potential brand is a great way to get a lay of the land in terms of running one of those franchises. Pay particular attention to franchises that are failing. You need to know if they’re failing because of the franchisee’s negligence or the brand itself failing in the area.
When choosing between the top franchises to buy, you have a lot of planning to do. Your finances have to be in a specific good order to be able to buy into a top brand and also have enough squared away in case something goes wrong.
To find the good franchises to own with your hard-earned money, you need to do your diligence in research. You need to look at what aspects of a business make it successful and whether your area has rejected businesses like that in the past. If burger joints fail in your area, you may want to find a BBQ franchise, etc.
Finally, when you’re sitting down with the actual franchisor, you want to make sure you’re getting a good deal. You want to look at the clarity of their procedures, the fairness of their contract, and the safeguards for you in case something goes wrong and you want to part ways with the brand.
Owning a franchise is a huge investment. These tips are a starting point to making sure that it’s an investment not only in your business potential but your financial future as well.
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