After meeting with your personal FranNet consultant to define your business model, you will be introduced to specific franchises that best match your criteria and can help you reach your goals. Before you invest any money, FranNet recommends that you use our Four Step Research Plan. These steps are designed to keep your decision making as simple as possible, by taking one small step at a time, yet they allow you to thoroughly evaluate a franchise. Provided you are researching no more than three franchise concepts simultaneously, you should be able to complete all steps in about four weeks. Remember, there is absolutely NO obligation on your part at any time during the investigation, other than prompt and candid communication with the franchisor and your FranNet consultant.
STEP ONE: TALK TO THE FRANCHISOR
When your FranNet consultant makes a referral, the franchisor will contact you typically within 48 hours. It’s in your best interest to create a good impression. You want the franchisor to view you as a qualified and serious potential owner.
Review the materials provided by the franchisor and prepare questions. If the Franchise Disclosure Document (FDD) is not provided with the initial information package, ask for it during your next call. The FDD is a legal document required by the Federal Trade Commission. This document provides all required disclosures, including a list of all franchisees.
Read the FDD from cover to cover and compile a list of detailed questions for the franchisor to answer during your next call.
STEP TWO: CALL AND VISIT SOME FRANCHISEES
Carefully target your list of franchisees to interview. Ask the franchisor which owners have similar backgrounds to you. Ask who the most successful owners are and which ones may be struggling. Once your list contains a good cross-section of the franchise community, begin your phone interviews using the following tips to guide your questions:
- Call at least eight to 10 franchisees and take careful notes. You may need to revise your list of questions as you go. If you receive the same answer from the first four to six franchisees, drop that question and perhaps add new ones that you’ve thought of.
- Arrange to visit two or three franchisees at their place of business. Once you have completed your calls and visits, ask yourself some key questions, such as: Can I see myself doing this business? Will I enjoy it and be good at it? Am I more like the successful owners in the system or am I more like the ones who are struggling?
Now it’s time for a self-evaluation! Based on what you’ve learned from the people inside the business, does this franchise fit your model? Can you see yourself doing what the successful franchisees have done? Will this business help you achieve your goals and vision? If you can answer YES to all of these questions, it's time to proceed to Step Three. If not, close the file and continue researching the other opportunities.
STEP THREE: VISIT TO THE FRANCHISOR
Many franchise companies refer to this visit as a Discovery Day. It is an opportunity for you to meet face-to-face with the key players, including top management and all the departments such as training, marketing, operations and accounting. On this visit you should decide whether you fit with their corporate culture, get your final questions answered and be able to answer a key question yourself: "Are these the types of people that I want as my partners?"
STEP FOUR: CONSULT WITH PROFESSIONAL ADVISORS
Use any and all experts that you deem appropriate. Hire a franchise attorney to review the agreement to make sure you understand all the provisions. You may also want to hire a qualified accountant to assess the financial strength of the franchisor and assist you with your economic analysis of the opportunity. If you will be financing a portion of your investment, you should be in discussion with one or more lenders at this point.