BY MARC KIEKENAPP | October 10, 2012
If you’re considering an investment in a franchise business, think of it as you would adding a stock to your financial portfolio. I would suggest a meeting with your CPA or business attorney to see how a franchise fits into your overall investment package.
As most of us know financial consultants are conservative in nature especially when discussing long term commitments of your time and energy. Buying a franchise will undoubtedly require a good percentage of your financial allocation, so a informed opinion is required. Discuss with them your plan and the amount of funds to invest in a franchise so you have a good sound financial plan moving forward. This is the most important step in the process. You need to feel comfortable with the investment level and look at it as an investment in the future not an overnight success. There are literally 100’s of top franchises available that fall into that $50,000 to $100,000 category. There is a misconception among franchise seekers that if you don’t invest hundreds of thousands of dollars that it is not a good franchise opportunity! That is far from the truth and many of the most profitable franchises require less than $100,000.
Leveraging your liquid cash is a consideration for many franchise business owners. The lending market is very tight today but there is money available for franchise investors with good credit scores and management backgrounds. There are many creative avenues for business funds today.
- Retirement Fund Rollover Programs
- Commercial Lines of Credit
- SBA Loans
- Conventional Lending
- Franchisor Lending Programs
What type of franchise should I Investigate?
There are a variety of franchise opportunities available in almost every sector of business. It is important to select a franchise that operates during the hours you want to devote to the business and it should fit business skills that you’ve acquired during your professional career.
For instance, if your interested in a retail franchise or food or restaurant franchise, count on working 7 days a week, at least in the early going. You’ll need management skills to hire and supervise a food manager or a manager to oversee your retail franchise business.
Automotive franchises will require a commitment of 6 days a week and customer service skills as well as management expertise. A business franchise typically will require your attention 5 days a week and require some sales experience. Lastly, if you buy a home services business i.e. residential maid services or handyman franchise, you will be committing yourself to 5-6 days a week and need some customer service and management skills.
What are the typical steps when investigating a franchise opportunity?
Once you’ve decided on a franchise category and have determined how much money you are comfortable investing it is time to engage in discussions with top franchise companies. This should be a process of mutual investigation and a learning process for both you and the franchise company. It is as important for both parties to have a good match for the franchise system. Successful franchise owners find a franchise opportunity that fits their investment budget and their skill sets.
Steps in a typical Sales Qualification Process:
- You request franchise information via the internet or phone
- Franchise company will contact you via email or a phone call
- You will have an initial conversation to discover if there is common interest in moving forward. The franchisor will ask you if the invest level is within your financial capabilities. It is important to share this information.
- The Franchisor will send you a franchise information packet for you to review
- A scheduled phone call or meeting will take place to review the information
- If you have further interest you will be asked to complete a profile with background and financial information questions
- Receive the Franchise Disclosure Document and review with the franchisor
- Validation calls with existing franchise owners
- Attend a discovery day or office visit at the franchise headquarters
- Approval of the Franchisor and your acceptance or rejection
- Agreements Signed
Once you begin this process you need to commit the time and effort to conduct your research properly. The franchisor will have designed a system for you to obtain vital information that will assist you in making a decision about the franchise opportunity. I believe it is important to look at 2 or 3 top franchise opportunities so you have a basis for comparison and can make an informed decision.
The franchisor will require that you disclose your financial information at the appropriate time. You should have prepared this in advance with your accountant or CPA and be able to supply this information to the franchisor in a timely manner. Once this exchange of information takes place you will be receiving confidential information about the franchise opportunity and have access to existing franchisees during the research process. The franchisees will be your biggest asset in the research process and will provide you with real world challenges and opportunities that are available within the franchise system.
Don’t rush or be rushed into a decision for franchise ownership. This will be one of the most important decisions of your life and should be a fun and enjoyable process.
