How To Choose A Franchise


You'd like to go into business for yourself, and believe that the best way for you to become your own boss is to buy a franchise. You know it will takes time and money to be successful, and that's OK. But which franchise should you buy? Which makes the most sense for you?

Here are some criteria that can help you make your decision:

1. What products or services would you enjoy selling?

What industries do you like, or dislike? Your best bet is to find a franchise in an industry you know at least a little bit about. All too typical is the case of the Chicago car salesman who decided to change careers and go into business for himself. He bought a basement waterproofing franchise but then found the business boring. He wanted to sell it, but sales weren't as high as he had expected they would be and he had trouble finding a buyer. He was stuck paying off the franchise fee and working at a business he didn't enjoy.

2. How much money do you have available to invest?

The amount of money you have available to invest in a franchise is an important factor. If you've only got $30,000 and the minimum investment for a specific franchise opportunity is $90,000, the opportunity isn't going to be right for you, no matter how much you like the company.

3. What's the total cost of purchase?

The franchise fee won't be your only expense. Find out what you can expect to pay for advertising, training, inventory, insurance, and all other costs in addition to the franchise fee and royalties.

4. How well established is the franchise?

How long has the franchise been in existence? Have they been in business for many years or are they brand-new? How many other franchises have they opened and where are they located?

5. How stable is the franchise?

What is the background of its officers? (Any history of litigation or bankruptcy of the franchise or its officers is supposed to be included in the disclosure document.)

6. What kind of track record does the franchise have?

Have most of their franchisees been successful? Names and addresses of franchisees in your state should be provided before you sign any contract. Call the people on the list and ask about their experiences.

7. What training is available?

Ask what training and support will be provided as part of your franchise fee. Will you get step-by-step instructions and hands-on training? What kinds of manuals and other materials will you get?

8. How close to your store can the franchisor let another franchisee set up shop?

9. Will you be required to purchase supplies or products from the parent company?

If so, compare your cost to the local retail prices of the same goods. There have been instances where the price from the franchise company for goods was higher than the price of the same goods in local retail stores. Selling anything under such conditions would be quite difficult.

10. What do the contract terms say about ownership? Can you sell out to someone else if you wish?

If you want to continue when the contract expires, will it be automatically renewed? Will you be able to convert your store into an independent operation if you should want to?

11. Determine how disputes will be handled should they arise. Watch for clauses requiring arbitration in the franchisor's home state if it is different than yours. Should a dispute arise, you'd have to travel to that state for arbitration hearings.

12. What criteria does the franchise use in selecting franchisees?Do they do any screening? Or, do they seem more interested in getting your franchise fee?

13. Does the franchise use high-pressure sales techniques to get you to sign on the dotted line?

14. Do you like the people you are dealing with?

15. How big is the market for the franchise's products or services in your area and how much competition is there now?

Janet Attard is the author of The Home Office and Small Business Answer Book. Find additional practical tips on choosing and buying a franchise at http://www.franchisetrade.com.