Franchise Frenzy! How to Buy a Franchise in 5 Simple Steps

How to buy a franchise?

Here are 5 simple steps

If you're thinking of buying a franchise, there are some things you'll need to know about the process. Read through to learn more!

Buy a franchise

Is owning a franchise one of your dreams? Let us help you make that dream happen by showing you how to buy a franchise in just a few simple steps!

What is a Franchise?

Someone who buys a franchise takes over a store of an already established company such as McDonald's or Edible Arrangements. You aren’t having to start your business from scratch.

You must pay the franchisor a fee upfront, and then pay continuing royalties on your business. They provide you with a trademark, support, and rights to their equipment and products.

Step 1: Consider Your Options

Look for a list of franchise chains to determine which one is best for you. Here are a couple of franchise corporations:

• Soccer Shots

• Checkers Restaurant

• Culvers Restaurant

• Edible Arrangements

• Planet Fitness

• Firehouse Subs

If you are interested in looking at a list of the top 2020 franchise locations, click here.

Step 2: Keep in Mind Qualifications

When buying a franchise, several qualifications must be met. I have made you a list below:

• Have a credit score of at least 680 (check your score here for free.)

• Capital—you will need to place a large fee initially along with other necessary franchise costs.

• Net Worth—You will need your net worth to be higher than your investment.

• Industry Experience—Choose a business you are familiar with. Relevant experience is one thing franchisors look at.

• Experience as a Manager—You must have some type of managerial experience when running a franchise business.

Step 3: Apply for a Franchise

Fill out your chosen franchise’s applications and questionnaire forms! Once you pass the application process, the franchise will send a representative to meet with you to give you a Franchise Disclosure Document (FDD).

This document will detail the company’s fees, rules, financial history, and legal aspects. Legally, you have 14 days to review this 50-page document before you sign any binding agreements with the company.

Step 4: Determine Which Finance Option is Best for You

When it comes to funding your business, here are a couple of options you can choose from that will help you get your franchise started:

• Rollover business startups (ROBS)

• SBA loan

• Bank loan

• Funding from the franchise itself—Some companies offer full or partial financing options.

Step 5: Buy a Franchise Location

You can choose to lease (rent) a property or purchase outright for your business. Most new franchisees opt to lease a property since it is less money up-front. As their business grows, they may choose to buy a location.

When choosing your location whether you lease or buy, you need to consider the following:

• Is your location safe and easily accessible?

• Are there any major competitors to your business nearby?

• Is your building space large enough?

• Is your location in a highly trafficked area?

• Does the location add to your advertisement visibility or subtract?

Final Thoughts

Now that we have discussed some of the ways to make your dream a reality, we must warn you, following your dream is never going to be easy.

Opening a franchise will take a lot of time, effort, and hard work but once you accomplish the goals you set forth, you will find the rewards are worth every ounce you’ve invested. 

Want to learn more about how to buy a franchise? Contact us today to learn more about how we can help. 

BizNexus -Learn More From Our YouTube Playlist:

BUSINESS ACQUISITION

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THE BIZNEXUS ROUNDUP

Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.

How to Buy a Franchise: 5 Best Practices for Buying a New Franchise Opportunity

How to Buy a Franchise?

5 best practices for buying a new franchise opportunity

There's a lot that goes into investing in a new franchise. If you want to learn how to buy a franchise, check out some of these best practices.

How to buy a franchise

Wondering how to buy a franchise?

Trying to decide if a new franchise opportunity is a good choice for you?

If you're starting a new business, buying a franchise is one of the best options available. It can be less risky than starting completely from scratch.

As opposed to buying an established franchise opportunity, becoming a part of a new franchise can be even better in some ways. However, there are a lot of things you'll need to think about to ensure you're making the right choice.

Below we'll tell you about the 5 best practices for how to buy a franchise.

1. Research the Franchisor Extensively

When you're thinking about buying a new franchise opportunity, it's important that you do plenty of research on the franchisor to make sure they're worth your time, effort, and money.

You should find out everything you can about the franchisor's history and track record as well as the people behind the scenes. You should also find out what you can about the franchisor's financial well-being to ensure that they'll have enough capital to help with your growth.

You should do some digging online to find out more about a franchisor. You may also want to speak to some of the current franchise owners as well.

2. Ask Questions

When thinking about buying a franchise opportunity it's important that you feel open to ask questions. If you have any concerns, bring them up.

You'll want to speak plainly with the franchisor to find out exactly what you can expect from working with them. Ask as many questions as necessary to find out what you can about marketing methods, training tools, technology, operations, and provided support going forward.

3. Be Ready For Legalese

When thinking about joining a franchise, you should also be fully prepared for looking over the franchise disclosure document. You'll want to review it carefully to ensure that you understand exactly what your legal responsibilities and rights are.

If dissecting legal documents isn't your strong suit, you may want to hire a franchise attorney to help you look over it. While it will cost you to hire an attorney, it will be well worth it and can help you avoid big problems later on down the line.

4. Know Your Worth

One of the best practices for buying a new franchise opportunity is to remember that you have value. New franchisors don't hold all the chips and chances are that they need you just as much as you need them.

Because of this, you may have a bit more wiggle room when it comes to negotiating a franchise agreement and getting a deal that is right for you. New franchisors may be willing to work with you a bit more than an established franchise will, as long as they can still maintain the consistency of their franchise brand.

5. Understand Your Market

In addition to knowing everything you can about the franchisor, you also need to think carefully about the market at large.

Look at the trends locally and nationally and be realistic about whether you believe the franchise truly has a place in the marketplace. Look at your community as well as the economy and consider what your community's interests and needs are.

You need to be sure that the franchise you're considering will be appreciated. Don't just rely on wishful thinking or your own personal preferences when deciding to buy a new franchise.

How to Buy a Franchise With These Best Practices

If you're ready to be a business owner, buying a franchise can be a great place to start. However, while learning how to buy a franchise isn't hard, making a profitable choice is much more difficult. It's important that you remember these tips if you want to be confident that you're making the right decision with your purchase.

Ready to get started with buying a franchise? Click here to start looking for a new franchise opportunity now.

BizNexus -Learn More From Our YouTube Playlist:

BUSINESS ACQUISITION

Have you checked out our podcast?

THE BIZNEXUS ROUNDUP

Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.

11 Critical Things to Grasp Before Purchasing a Franchise

Buy a Franchise?

Must know 11 vital points before you purchase a franchise

When you own a franchise, you can get into business for yourself and not by yourself. An owner of a franchise will operate by selling services or products that are established and those that have significant brand recognition.  Apart from the trademark, service, and product, a franchise also comprises a complete method of conducting the business-like operation manuals and marketing plan. Managing a franchise will increase the chances of being successful in your business since you will be leveraging a business model that is proven and benefits from the available customer base that can take years to grow using your idea.

Most people are known to make the mistake of thinking that franchises are a small business in a box and they do falsely believe that most of the franchises do have a much lower failure rate when compared to other types of companies which is never right. Just like the different types of businesses, up to 60% of franchises will most likely be out of business in the next two years.

Hence, if you do not have plans for purchasing a franchise, you will have to prepare yourself. While such business types are known to offer one with everything that you need to get started together with training yourself and your team, running them has never been easy.  You will have to obtain the right amount of cash reserve to get started, especially when you want to venture into the food franchise. For instance, you will need to have up to 2 million in liquidity for you to apply in becoming a franchisee of any significant food franchise like Qdoba Grill or McDonald’s. The majority of the franchises will be required to give a specific amount to help in the advertisement.

 Things to Consider Before Purchasing a Franchise

Putting aside some of the risks, purchasing a franchise can be an excellent way of owning your own business and enjoying all the perks that come with it. Provided you do it in a smart and calculated way. 

 1.      Ensure You Do Thorough Homework

You will have to educate yourself. It is essential that you know about the business and industry you want to get. Take your time and interview the franchisor thoroughly. In most cases, they will always introduce you to the individuals who will be of help when you want to sell a business.   Feel free to ask questions concerning the pre-opening support, construction, design, training, financing, site selection, license boundaries, and grand opening program.

 2.      Assess your strength and Style of Work

You need to ask yourself how you feel when you carry out the same task every time.  Are you on good terms with other people? What’s your feeling when you perform business-to-business sales?  If you have a negative attitude towards purchases, you will always have trouble managing any business. However, if you are not on good terms with other people, you will always require a partner to help you handle the business side. Ensure you are still honest with yourself concerning your weaknesses and strengths.  Choose approximately three individuals whom you trust and ask them about your weaknesses and strengths. It is advisable that you go for a business which you have some experience. Never buy a business franchise just because you like eating. Purchase a restaurant because you do have lots of experience in the management and servicing of food.

 3.      Check the Fees

Apart from the initial franchise fee, most franchise opportunities will always be forced to pay for advertising and royalties fees.  We also have the opening day expenses which occur when the headquarters need you to give away the free stuff and carry out special promotions. 

It is vital that Franchisees be very careful to balance the restrictions/ requirements with their capability of managing a business.  Having a system-wide scandal can make your franchise fail to perform well.

 4.      Search for the Dirt

Consider taking advantage of sites like Sean Kelly’s Unhappy Franchise and look for the negatives about the franchise you are about to buy. For instance, Kelly did run exposes on NY Bagel Cafe by listing down the high closure rate of the stores.

However, one store consultant Richard Taggert does disagree with a report by Kelly and instead says that the company only had some small closings in the past decade.

 5.      Ensure You Immediately Get Your Money

Starting a franchise and running it does involve vast sums of money, including the equipment cost and buy-in fee, fit-up construction and the location of the retail businesses, and upfront market costs.

You will require a minimum of one year operating with the capital before the business picks up not to mention the monies you will have used to help in building up the business. Even some of the most popular brands like Dunking required some time to pick on a new location.

 6.      Ensure you carefully read through the FDD Disclosure statement

The FDD, Franchise Disclosure Document refers to a document that offers information concerning the franchise system and the franchisor to the requirements of the franchise. No franchise is independent. Most franchisees are known to operate their businesses about the restrictions and procedures that have been set in the franchise agreement.  The limits do comprise of services and products offered the geographical boundary and pricing. The agreement also makes requirements on the total amount of working capital the franchise will require. The Franchise Disclosure Document is considered to be one of the most barriers for many people to becoming a franchise as they have no control over the person that can buy a franchise in their region.

 7.      Make use of the Franchise Lawyer

Not all business lawyers are in a position of negotiating a franchise agreement. You will require a professional. The Franchise license agreement refers to a contract that helps in describing the relationship between the franchisee and the franchisor, including the use of fees, trademarks, control, and support.

It is a written legal contract between the franchisee and the franchisor that informs each part on what they are required to do.

 8.      Keep Your Eyes on Franchise Consultants

The majority of the franchise consultants are known to be paid sale individuals for franchise owners. The consultants will always put on a tough sell to ensure you get signed to a franchise deal as fast as possible. It is because they will still receive some commission from the initial franchise fee. Always ask them to make their agreements clear before you sign so that they do not lie to you.

 9.      Franchise Work

It is essential that you always learn by doing. Before you sell a start-up or get into any business or purchase a franchise, it is crucial that you first consider working for one or search fund. After you have become an employee, you can see how things are working out for you and the amount of support you are getting from the franchisor. It can be compared to being an undercover boss, and it can quickly provide you with some valuable information. You need to work for a minimum of six months to get a real impression of how things work.

 10.  Seek Professional Support

As it had already been mentioned in hiring a franchise lawyer, it is also essential that you get an accountant to help you in running the numbers. You will always require a detailed analysis to help you understand what your cash outlays in a month.  Getting seasoned insurance can also be of great help.

 11.  Contact Other Franchisees

It is advisable that you reach out to other franchisees to help hear their story and see what pros and cons the business will encounter. One of the most important questions you will have to ask any franchise owner is the amount of support they will be able to get from the headquarters. You will also be interested in asking them if they will invest in the business again. It is vital that you target at least 12 franchises since most of the small business owners are very proud of them and will never admit if they did struggle financially.

Depending on the type of entrepreneurship through acquisition you go for, you will always invest between $150,000 and $1 million before you even start your business. Always do yourself a favor by trying to get any franchises that are not happy online before you commit yourself to any franchise agreement.

It is also essential for you to know if there is any discord on your franchisor. Always take advantage of the regional and national advertisement, training, operational assistance, operating procedures, management support, ongoing supervision, and access to bulk buying. Another valuable resource you will need to check before purchasing any franchise is the international Franchising Association guide.

Despite running a franchise being an excellent idea to help start your business, it is crucial you understand what you are about to get into, whom you are about to start it with, and your plans on how you will ensure it is successful.

BizNexus -Learn More From Our YouTube Playlist:

BUSINESS ACQUISITION

Have you checked out our podcast?

THE BIZNEXUS ROUNDUP

Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.

An In-depth Step-by-Step Guide to Buying a Franchise

Approximately 1 out of 12 businesses in the USA is a franchise business. Opportunities like franchising and entrepreneurship through acquisition are some of the great ideas for business minded people looking to run a business without the struggle of creating a new business from scratch. However, establishing a successful franchise takes more than merely finding an ideal franchisor and financing your business. It is a complex step that requires careful planning and strategizing. You need to conduct comprehensive research, review the necessary documents, and follow the steps below.

Conduct Rigorous Research

Finding out the necessary information is the first step you should take when you need to buy a franchise. Thorough research will ensure that your venture into a field of your interest, within your budget and your qualifications. You need to ensure that you meet the basic requirements necessary to start a franchise and also assess your resources, skills, and interests. Your research needs to involve:

Talking To Franchisees

Take time to talk to current franchisees. Gaining an insight into their experience with franchising will help you avoid mistakes in yours, and examine what they did right and maybe use it for your business. Through franchisees, you will also identify the pros, cons, challenges, and hidden costs of running a franchise.

The Type of Franchise

Choosing the right franchise is an important step. To arrive at the right decision, you will need to examine your skills, the type of environment you want to work in, your interests, and your goals. Depending on your needs and budget, you can find companies willing to sell a start-up or already established business. You should also determine the amount of money you are ready to invest and the profits you would like to make from the franchise. This information will help you choose the right franchise.

The Qualifications Requirements

Franchisors set minimum requirements for their franchisees to protect their bottom line and ensure that the franchisees are qualified both financially and professionally. Qualifications vary depending on the type of franchise and the franchisors, but the standard requirements include a credit score, management experience, industry experience, net worth, outside income, and cash in hand.

Fill Your Initial Application Forms and FDDs

Once you have done your research and identified the franchise, the next step is to choose 1 to 3 companies to consider. These companies will give you a representative who will provide you with information about their company. You will also fill the first application forms and preliminary questionnaires. If the franchise is satisfied with your answers, you will receive a copy of the franchise disclosure document (FDD).

The FDD is a 50+ page document that indicates the fees you need to pay, your responsibilities as a franchise, information about the franchisor, and your responsibilities as a franchisee. Make sure you study this document to ensure that it is a good fit. The federal trade commission mandates franchisors to provide franchisees with the FDD at least 14 days before making any binding agreements.

Review The Agreement

If the franchisor decides that you are the right candidate to acquire their business, they will draft and offer a formal contract. Reviewing the agreement ensures that you understand everything before you sign it, so take time to read through the document and hire a franchise lawyer to help you better understand the terms of the contract. The contract gives you the legal right to own a franchise under its rules and regulations. The contract should indicate the rules on the transfer of ownership, royalty fees, hiring staff, protection of territory, pricing, suppliers, among others. Any promises made verbally also need to be put in writing, and any discrepancies between verbal and written terms should be clarified.

Investigate The Company

Once you have settled on a franchisor, you will then need to investigate the company. Buying a franchise involves developing a relationship with the company; it is vital to make sure that it is the right relationship, therefore, take time to talk to its executives, ask questions and also gather information about the company on your own.

Attending a discovery day is a good opportunity for the franchisee to get to know the franchise. It is an opportunity to learn about their culture and understand the people who will be working with you. Make sure you ask questions and voice your concerns during discovery day. A typical discovery day involves one-on-one meetings, interviews, a visit to the franchise location, and group presentations.

A discovery day is also beneficial to the franchise company. It allows them to get to know you better and assess whether you are a good fit for their company. They will also evaluate your level of enthusiasm and commitment at which will dictate their decision to sell a business to you.

Acquire Finances

You cannot run a business without finances. Before you buy a business, make sure you acquire finances to cover the costs of running a business. Franchisors may help arrange finances, but you will also need to qualify for financing on your own. A credit score of 700 gives you a better chance of securing funding. You can finance your start-up through SBA loans, traditional bank loans, search funds, rollover for business start-ups (ROBS), or a government grant.

Create A Business Plan

A business plan is not only a guideline for your business, but it also aids in acquiring finances. It keeps you focused, helps you achieve your goals, keeps you on the right track, and thorough market analysis gives you a better understanding of your market. Document every detail of your business to ensure that everything runs smoothly.  

A business plan shows investors that they are investing in a company with a vision and one which will last and grow. It helps them understand your vision and passions and shows where their money is going. Franchise opportunities require careful considerations, and creating a business plan helps assess your franchise's visibility.

Talk To a Franchise Attorney

If you are considering franchising, make sure you talk to a franchise attorney. These attorneys specialize in franchising, and they have a vast knowledge of franchising. A qualified franchise attorney will help you know everything that you need to know about franchising. This is because they know what to focus on in the FDD and the franchise contract; writing and working on similar documents gives them better insight. They know what to look for when reviewing the documents.

A good franchise attorney also helps the franchisee choose the best entity for their business. The right entity determines the legal rights and liabilities of the business and its taxation. You can also rely on your attorney for help when things do not work out as you expected. They also form an invaluable asset for the business as they can help negotiate the terms and conditions of the agreement and offer guidance to the vague aspects of the contract.

Picking a Location

Take into consideration the guidelines and recommendations of the franchisor to help you find an ideal location. In some cases, the franchisor may have strict rules for commercial real estate, including the number of parking lots, territory requirements, and the minimum squire footage.

Leasing a space is cost-effective, and less risky; however, if you intend to be in the place for more than seven years, consider buying your location. Whether it is leasing or purchasing a space, consider the safety of the area, the location of your employees and customers, the square footage, and negotiate the price. 

Acquire The Necessary Skills And Knowledge Of Running A Business

Before you open your business, take the opportunity to acquire the necessary skills and knowledge to run a franchise. Typically, the franchisor will provide training sessions that will tackle everything you need to know about the business, including the policies and guidelines, the products and services the systems you will be using. Working in a store is an ideal way of determining how a franchise works and whether your skills and personality match the company culture.

Open Your Business

This is the final step; it comes after you have finalized everything, and the franchisor representative approves your location. The franchisor will give you a hand during the actual opening. Marketing your grand opening is an excellent way to promote and market the business. It ensures that you build your customer base quickly. Before the grand opening, potential alert customers of the existence of your store, and you can also do a soft opening to identify and deal with the operation problems before the grand opening. The franchisor has pre-determined promotion ideas, signage, and ads for the grand opening in most cases.

It is worth noting that franchising does not eliminate the risks of owning a business. However, it allows the entrepreneur to handle the responsibilities that come with owning a business. It comes with an already Get Matched Now.

BizNexus -Learn More From Our YouTube Playlist:

BUSINESS ACQUISITION

Have you checked out our podcast?

THE BIZNEXUS ROUNDUP

Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.