THE FRANCHISE INVESTIGATION PROCESS
Step 1 - Initial Contact
There is no time like the present to discover all of your best options. Your contact information is kept confidential and is reviewed by our staff to alert you the best opportunities for your individual needs.
Step 2 - Consultation
One of our consultants will contact you to discuss your goals in finding the right franchise for you. This takes just a few minutes and can be accomplished over the phone. Understanding your particular goals and needs will allow us to find the best opportunity for you. We will set a follow up appointment to present you with opportunities that fit your requirements.
Step 3 - Research
We take the information provided by you, research available franchises and match them with your stated goals and needs. We represent several hundred franchises and our goal is to identify the best three or four franchises that match your requirements.
Step 4 - Presentation
We present you with the opportunities that we have identified in our research. This meeting should accomplish two goals.
First, if any of the opportunities are of interest to you, then we will arrange an introduction directly to the representative of the franchise. This will require that you complete and submit a confidential questionnaire to be supplied to the Franchisor. The Franchisor wants to know that you are financially qualified to purchase their franchise, that your timeframe to buy is within reasonable limits, and that your partners or family are in complete agreement with you on buying a business. This does not obligate you in any way. It simply shows the Franchisor that when you find the right opportunity then you are capable of moving forward.
If our selections do not seem to be on target, we will need to clarify your goals and needs identified in Step 2, sending us back through Steps 3 & 4. This may take place several times throughout the process.
It is important to remember that the Franchise Consultant is presenting you opportunities, but you must make the decision that is best for you and your family . Therefore, refining the criteria for the best opportunity for you is an ongoing process.
Step 5 - Introduction to Franchisor
For each of the opportunities that you have an interest, we will introduce you to the Franchisor. The Franchisor will send materials to help you become acquainted with their franchise. They will also send the Uniform Franchise Offering Circular (UFOC), which is a disclosure document for their franchise opportunity. The UFOC receipt should be signed and returned immediately.
Step 6 - Review of the UFOC
This document, commonly referred to as the UFOC, is the Federal Trade Commission (FTC) mandated disclosure document that gives you a wealth of information about the franchisor. The form and composition of the document is standard with any franchisor and must include information on a variety of topics of interest to you. The major subject areas include:
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The Franchisor, It's Predecessors And Affiliates
Business Experience
Litigation
Bankruptcy
Initial Franchise Fee
Other Fees
Initial Investment
Restrictions On Sources Of Products And Services
Franchisee's Obligations
Financing
Franchisor's Obligations
Territory
Trademarks
Patents, Copyrights and Proprietary Information
Obligation To Participate In The Actual Operation Of The Franchise Business
Restrictions On What The Franchisee May Sell
Renewal, Termination, Transfer And Dispute Resolution
Public Figures
Earnings Claims
List Of Outlets
Financial Statements
Franchise Agreement
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Roughly 18% of franchisors publish an Earnings Claim statement under Item 19 of the UFOC. Though they are not required to do so, this can be a real time saver for you. Even if it is included in the UFOC, it is still imperative that you discuss this subject with franchisees during your fact-finding calls and visits. You will want to carefully review the UFOC and note any questions or issues that the material raises for further discussion with the franchisor.
Step 7 - Attend a Discovery Day
Most franchisors have a Discovery Day, where they will invite you to their location. You will not only get crucial information for your decision, but will get to meet the staff that will be providing your initial training and continuing support.
Step 8 - Franchisee Calls and Visits
The most valuable source of information on any franchise system is the existing franchisees. You need to plan on calling or visiting a number of the existing franchisees during your investigation. It sounds almost trite, but whatever you find the prevailing attitude of the existing franchisees on any issue to be, it will almost certainly be your attitude on the issue as well if you decide to become a franchisee. Visit with a sufficient number of the existing franchisees to ensure you have a sense of the prevailing attitudes of the group.
Though you want to find the overwhelming majority of franchisees to be happy and supportive of the franchisor, it is important to try to find an unhappy franchisee during your investigation. When you do, not only listen to the complaints but also try to determine what makes this franchisee different from the rest. If you find you identify with the positive ones and feel the negative franchisee is not at all like you, then you should be fine. If you find that you are more like the person who is unhappy however, this is probably not the right franchise for you. The following list covers the principle areas you want to investigate during these calls:
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(a. ) Training Programs - You need to determine how well the initial training programs and support prepared the franchisees for opening and running their business.
(b. ) Opening Support - How easy did the franchisor make the process of getting the first unit open and operating? Was there assistance in site selection, lease negotiation, construction and design assistance, financing assistance, permits or any other factors unique to getting this business up and operating?
(c. ) Ongoing Support - You want to know how effective the ongoing support services of the franchisor are in terms of helping franchisees deal with the problems that come up in the running of their business.
(d. ) Marketing Programs - Most franchisors collect marketing dollars from every franchisee into a pool that is spent to promote the brand. You need to know whether the franchisees are happy and supportive of the way this process is handled. Note: this is typically the area where you will find the most complaining in any franchise you examine.
(e. ) Purchasing Power - Does the franchisor use the collective buying power of the total system to get discounts on supplies and inventory beyond what an independent operator could achieve? This factor is one of the biggest advantages of joining a well-run franchise system and should offset much of the fee cost associated with being a franchisee.
(f. ) Franchisor/Franchisee Relations - Determine what the franchisees feel about the franchisor in general. Is the franchisor supportive, caring, focused on their success, responsive, effective, organized, and trustworthy? Make sure you have a good feeling about the values of the organization and that they are consistent with your values.
(g. ) Investment - The UFOC will give you a wide dollar range for the investment required in the business. Use the franchisee discussions to narrow that down to a reasonable and conservative estimate of how much capital you will need to be successful in this franchise.
(h. ) Earnings - It is critical that you have a strong sense of just where the average unit is in terms of earnings. You should know the answers to the following questions:
If you are simply not able to determine these answers to your satisfaction in your research, do not settle! Tell the franchisor of the problem and that you cannot proceed unless you have these answers.
It is always a good idea to bring up the subject of earnings as the last point in your visits with existing franchisees. Most people are reluctant to discuss their income with strangers and you will find the franchisees are more willing to cover this subject after you have spent some time visiting with them. At that point they recognize that you are not a competitor trying to get information but rather a serious prospective franchisee who will need the information to proceed. They were all in your position at some point in the past. |
The Franchisor will provide you a list of several franchisees for you to call to ask questions about the franchise. Obviously, the Franchisor most likely to give you a list of franchisees that are successful and have positive things to say about the franchise. The reason for calling these references is to ask them why and how they became successful. Then you need to determine if you can be do the same things that they did to be successful.
Step 9 - Meet with Attorney and Accountant
You should always consult with an attorney and an accountant before making a decision. It is important to insure that both people have a good background in franchising. If they don't, then the process may cost you more than you needed to pay, while they do the necessary research to get themselves up to speed.
Step 10 - Decision Time
If you have been diligent, the entire process outlined above should have taken about two to four weeks to complete. You have now finished your investigation and have all the information you need to determine if this franchise is right for you. It either is or it isn't, and you'll know which it is. In either case, it is time to make a decision and move forward.
You have taken all of the necessary steps to get to this door of opportunity, now all you need to do is open it. Congratulations!
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How much money does the typical unit make given a specified length of time in business?