Finding a Franchise: Six Steps from Interest to DecisionPinot's Palette
You’ve decided to take your career into your own hands. You’ve even started looking at franchise opportunities. But the process of becoming a business owner and franchisee can be a bit intimidating, especially for first-timers. With so many franchises out there, how you do you narrow down your choices? How do you choose the franchise that’s right for you?
The decision is seldom a simple one. We’ve identified six steps to help you confidently and enthusiastically choose a franchise.
Step 1: Set a Few Goals
It’s time for some introspection. Ask yourself why you want to open a franchise:
- Do you want to make a certain amount of money?
- Are you hoping for more flexibility and a balanced lifestyle?
- Do you want to work closer to home?
- Are you looking for a business that combines work with fun?
- Do you enjoy interacting with lots of people or do you prefer a quieter atmosphere?
Honest answers will lead you to the right company. Moreover, ask yourself if you need to purchase a franchise at all. As this article in Entrepreneur highlights, there are distinct advantages to joining a franchise system, including operational support, training, and marketing assistance. But becoming a franchisee isn’t for everyone. Are you a Lone Ranger, an independent sort who likes to do things your own way?
As a franchise owner, you will be given processes and procedures from the franchisor. Following those procedures may save you time and are part of your investment into a brand. If you feel you would be constrained with the stringent standards of a franchisor, ask the franchisor where owners are allowed to be creative and collaborative.
Step 2: Research, Research, Research
Do your due diligence as you research interesting franchise concepts. A franchise agreement usually lasts 7-10 years. Definitely a long-term commitment. You want to thoroughly review any franchise beyond the glossy marketing materials. Upstanding franchisors know that transparency with prospective owners benefits the whole franchise system. A true partnership between franchisor and franchisee contributes to long-term growth of the brand and customer base.
Reflect on your personal and business goals and think about whether a particular franchise fits with those goals. As this Wall Street Journal article points out, franchisee success often depends on three key factors: researching carefully, picking a franchise that matches your interest and abilities, and securing adequate funding.
Identify businesses that fit your natural interests. You’ll enjoy your work more if your franchise matches up with your interests and abilities. Are you looking for less customer interaction or do you want a customer-focused, fun franchise opportunity?
In researching franchise opportunities, you’ll definitely want to visit and thoroughly review each of the franchisor websites. Also visit other franchise-focused websites like Franchise Business Review. This site surveys many franchises and presents survey results across brands. This lets you evaluate which franchises have the highest satisfaction ratings from franchisees. Franchisegrade.com is another great site to review during your research. It takes the franchise disclosure documents (outlining financial information) of many franchises and compares them to the industry as a whole. And the site of the International Franchise Association has a Franchising 101 section that walks visitors through the steps toward searching for and funding a franchise.
Step 3: Apply for a Franchise
Most franchise websites have a “Get More Info” form. After you fill this out, they’ll contact you to answer your questions and give you additional information. If you’re still interested, you’ll then fill out a longer application.
Some franchisors may bombard you with a spammy sales pitch. But upstanding companies view franchising as a recruitment process. They’ll want to evaluate you as carefully as you evaluate them. They’re interested in the long term financial viability of the franchise, and they won’t want to sign a franchisee who isn’t a good fit. These more discerning franchisors will evaluate your personal and financial compatibility with the franchise. Be ready to answer questions like: What is your income? How much capital do you have available for investment in a business? What is your credit score? What are your plans for securing funding?
The franchisor may also reveal its financial information from Item 19 in the company’s franchise disclosure document. This is a standardized document used across all franchises that enables you to compare franchise business models, fees, financials and system growth. Researching and comparing franchises thoroughly takes a significant investment of time. Plan to spend at least a couple hours per week per franchise on research and Q&A sessions with each franchisor.
Again: Plan to spend at least a couple hours per week per franchise on research and Q&A.
Step 4: Get a Firsthand Look
Many franchisors have an in-person meeting opportunity where you can meet members of the corporate team prior to joining. If you’re looking at franchises at a higher investment level or with a retail front, you’ll want to find out who you’ll be working with and speak with them.
At Pinot’s Palette we call this event Discovery Day. We have our operations and marketing teams and even our co-founders present. Discovery Day is a critical point in the journey toward your paint and sip franchise. The in-person meeting gives you the insight to decide if you want to work with the headquarters team. Do the representatives from the company seem trustworthy and personable? Are they people you’ll be comfortable working with for years to come?
At the same time, the franchisor will be asking whether you’re a good fit for their company. They’re looking at long term strategy for their business, and they want to figure out if you fit the bill. Discovery Day provides a great opportunity for mutual consideration of a potential business relationship.
Step 5: Talk to Current Franchisees
You’ve thoroughly researched the franchise and talked with members of headquarters. Now make it a priority to speak to several of the company’s current owners. The franchisor should assist you in setting up calls to franchisees. Ask them questions that will provide insight into the franchisee experience, including:
- What’s a typical day at work like for you?
- What do you wish you would have known before investing in a franchise?
- What have you enjoyed most about your business ownership experience?
- What has been the biggest challenge in opening your studio?
Typically, after Discovery Day, Pinot’s Palette facilitates calls with owners who are similar to the candidate. We also help with introductions to any other owner you would like to speak with. This varied perspective provides the candidate with a good feel for the entire system.
Step 6: Weigh Your Options
As you narrow down your franchise opportunities, you’ll need to evaluate your initial investment versus your earning potential. Instead of focusing exclusively on the initial cost of each franchise opportunity, evaluate the investment as a whole. Take out those franchise disclosure documents and compare Item 19, the financial performance representation, which tells you about the franchise’s sales history.
Aside from financial prospects, continue to reflect on your conversations with headquarters and with other franchisees. How much training and support will you receive? Are there differentiators that can save you time and money as an owner? Sometimes, you just have to “go with your gut” in making the decision. If you feel uneasiness about a certain franchise, then it’s probably not the place to invest. Forbes emphasizes the importance of evaluating your emotional connection to a franchise in this article on finding the right franchise.
After completing these six steps of franchise evaluation, you’re sure to feel confident about your decision—whether that decision is to pursue a vetted franchise, become an independent entrepreneur, or sit out business ownership altogether.