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How Do You Buy a Franchise?

By Del Salinas

Franchising offers a unique opportunity to become a business owner with the backing of a proven business model and established brand recognition. However, navigating the process of buying a franchise can be complex. In this guide, walk through the steps to buying a franchise. Plus, get valuable insights to help you make informed decisions on your entrepreneurial journey.

1. Assess Your Strengths & Weaknesses

Before diving into franchising, determine your strengths, weaknesses, interests, and financial capabilities. Consider factors such as your experience, skills, and passion. Reflect on your long-term goals and what brings you maximum happiness and fulfillment. This self-assessment will help you identify industries and franchises that align with your goals and values.

2. Research Different Industries

Once you understand your preferences and capabilities, research potential industries. Maybe you know exactly what you want to do, and maybe you are considering several career paths. We encourage you to be open-minded and look into several industries to make sure you find the right fit. 

In addition to your preferences, here are some things to think about when choosing an industry:

  • Current economic conditions and future predictions
  • Potential customer base
  • Market saturation
  • Levels of regulation and licensure

RELATED CONTENT: Should You choose a Franchise in an Industry You Know?

3. Research Franchise Systems

Next, explore various franchise opportunities, models, and brands to find the right fit for you. You will likely spend the most time in this research phase of the franchise buying process. It should include conversations with the franchisor and franchisees, along with other research into the franchise's reputation, financial performance, training and support programs, and growth potential.

Here are some considerations for your research.  

Talk with the Franchisor

You will have direct contact with someone from the franchise’s sales team. Like any salesperson, the franchise sales team has a specific goal, but they also want to find franchise owners who are a good fit. The franchise system does better when franchise owners are happy and successful.

Some good questions to ask your franchise sales representative include:

  • Do you think I am a good fit for this franchise? If so, why?
  • What industry trends might affect my franchise in the next 5 years?
  • What is the most important quality you look for in a franchise owner?
  • What initial training, ongoing training, and support do you provide to your owners?

Remember that the franchisor is ultimately fueled to bring new franchisees to the system. So, it is important to talk to franchisees who execute the business model every day. 

Talk with Franchisees

The franchisor will provide you with testimonials from their most successful franchise locations. But you should also feel free to seek out other owners to get the whole picture. Most owners will be happy to be candid about their experiences.

Some of the questions you may want to ask franchise owners include:

  • Would you buy this franchise again?
  • How useful was the franchise training?
  • Do you feel listened to by the corporate office?
  • Do you have any plans to sell your franchise? If so, why?

You can also ask open-ended questions like, “What has your overall experience been like?” for more helpful answers.

RELATED CONTENT: Benefits of a Franchisee Support Network

4. Review the Franchise Disclosure Document

The law requires franchisors to provide potential franchisees with a Franchise Disclosure Document (FDD). Franchisors must give you the FDD at least 14 days before they ask you to sign a franchise agreement or pay any fees. 

The FDD contains essential information about the franchise system, including the following:

  • Franchisor's background
  • Franchise fees and costs
  • Territory rights
  • Obligations
  • Legal agreements

Consider seeking assistance from a legal or financial advisor. They can help you fully understand the terms and implications outlined in the FDD.

5. Evaluate Financial Feasibility

During the initial phases of your research, you will usually find a general range of franchise costs. However, as you get further in the process, you need to get specific numbers. 

  • Initial franchise fee
  • Royalty fees
  • Additional fees (technology fee, marketing fund, etc.)
  • Required liquid capital 
  • Operational costs

With more concrete numbers, you must consider the financial options available. Assess whether you need financing and explore options such as small business loans, SBA loans, or franchisor financing programs.

6. Attend Discovery Day

Many franchisors host Discovery Days or Meet the Team Days when prospective franchisees learn more about the business. You will have meetings with the franchisor's management team, learn more about the business model, and be able to ask questions. 

Attend a Discovery Day to gain firsthand insights into the franchisor's culture, operations, and support systems. This meeting can help you make a more informed decision about whether the franchise is the right fit for you.

Typically, the franchisor will also evaluate you during this time. They want to ensure you are a good fit for the franchise brand and will be a valuable asset to their community. 

7. Secure Financing

At this point, you have selected a franchisor, so it is time to get finances in order. If you require financing to purchase the franchise, begin the process of securing funding. You may need to prepare a business plan that outlines your financial projections, operational strategies, and growth plans to present to lenders or investors.

8. Sign the Franchise Agreement

To make it official, you must sign a franchise agreement. Work with legal and financial professionals to review the agreement. Some franchisors allow for negotiations to allow you to fully protect your interests. 

This agreement is a legal contract that protects the brand and franchisor's intellectual property. It should outline your territory and rights as an owner. It will also include the duration of the contract, information about resale, and financial terms.

At the time of signing, the franchisor may require you to pay the initial investment. Note that some states and franchise systems may have different timing for when fees are due.

9. Training

Now it is time to get started! Your franchisor should work with you to help you get ready for launch. They may help with purchasing equipment or office supplies and obtaining state licensure. And you will be required to attend training. 

Participate in the franchisor's training program to learn day-to-day operations, systems, and standards. Use this time to build relationships with the franchisor's support team and fellow franchisees. Ask questions at every step! You want to leave training feeling prepared and confident about the launch of your business.

With comprehensive training and ongoing support, you will be well-equipped to launch and grow your franchise business successfully.

RELATED CONTENT: 7 Tips to Evaluate Franchise Training Programs

Joining the Caring Family

While it may seem overwhelming, buying a franchise does not have to be complicated. The right franchisors will help guide you through the process. They will be prepared to answer your questions and concerns at each step of the way. 

At Caring Senior Service, we try to make the path to ownership as smooth as possible. Whether you have a background in senior care or not, we are happy to help you learn more about a home care franchise business. Just reach out to our team, and we will be in touch.

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Tags: Franchise Ownership