The decision to acquire a franchise is a major life choice that is like any other investment: it comes with risk as well as potential rewards. You will want to choose your franchise carefully and make sure you can finance your franchise acquisition.
Do Your Homework
What is the market demand for the franchisor’s products or services in your community? Does the product or service generate repeat business? Is the franchisor’s name well known that it will bring in customers, or will you have to create a market for the franchise?
As you consider your potential franchise, you need to do considerable market research.
- Step 1. Clearly Define Your Objective Although you know you are attempting to determine if a particular franchise is right for you or not, you need to frame your research more precisely, such as “what is the market opportunity for the franchise’s product or services? In other words, you want to make a qualitative assessment, but also complete a thorough quantitative assessment.
- Step 2. Design Your Research Approach How will you gather information? Will you conduct a survey or organize a focus group? What questions will you ask? What secondary data will you include and where will you get it? Will you conduct your research by telephone, in-person, mail or online?
- Step 3. Design Your Research Tools If a survey is the most appropriate tool , you’ll begin by writing your questions and designing your questionnaire. If a focus group is your instrument of choice, you’ll start preparing questions and materials for the moderator.
- Step 4. Collect Your Data Now you get to collect the answers, choices and observations from your survey or focus group, as well as your secondary data. Each nugget of information is precious and will be part of your conclusions in your decision-making process.
- Step 5. Analyze Your Data Now you have collected mountains of raw data. Now the fun begins as you begin to organize and analyze and look for the major trends in your data. You are getting closer to seeing if the franchise you are considering is right for you.
- Step 6. What’s Your Conclusion? After spending hours gathering data and pouring through the results, it is time to compile your most meaningful take-aways. Make sure you go back to your original research objective and restate those questions, and then present your conclusions based on the data you have collected and analyzed.
What about Competition?
How intense is the competition in your area? Are there many franchised and company-owned outlets? Does the franchise sell products or services that are easily available online?
How many competing companies sell similar products or services at a similar price? Are those companies well established or widely recognized in your community?
Your Ability to Operate the Business
Buying a franchise gives you the right to associate with the franchisor’s name or brand. An established franchise with a well-known name — and good reputation — is more likely to draw customers than a relatively new or unknown franchise.
Many franchisors have years of experience selling goods or services and managing a franchise system. Some franchisors started by operating their own business. There’s no guarantee, however, that a successful entrepreneur can successfully manage a franchise system. Does the franchisor have enough expertise to make you feel comfortable?
What will happen to your business if the franchisor were no longer in business? Will you need the franchisor’s ongoing training, advertising or other help to remain in business? Will you have access to the same suppliers?
If you invest in a franchise, you’ll be responsible for creating customer demand for its goods or services in your area, no matter how much support the franchisor offers. It is vitally important to know how you will finance your franchise acquisition as well as access ongoing financing to run your franchise.
Complaints About the Franchise
It’s also a good idea to check whether consumers or franchisees have filed complaints against the franchise or franchisor with franchise regulators, Better Business Bureaus (BBBs) or local consumer protection agencies in your state or the franchisor’s home state.
Training and Support Services
What training and continuing support does the franchisor provide? Does the training measure up to the training provided by other franchisors in the same type of business and for workers in that field?
Can you compete with others who have more formal training? What backgrounds do the current franchise owners have? Is your education, experience or training similar?
A growing franchise system increases the franchisor’s name and brand recognition and may enable you to attract customers. But growth alone doesn’t ensure that franchisees will be successful. What do current franchise owners say about the quality and usefulness of the training they received?
Finance Your Franchise Acquisition
A big part of your decision process in choosing a franchise will be how you will finance your franchise acquisition.
You can always use your own money and savings but leveraging other people’s money is most often the best path to finance your franchise acquisition.
You could choose SBA Guaranteed Loans or a wide range of financing programs including personal and business term loans, lines of credit and other programs.
Once you have completed the process of choosing a franchise, contact Deliver Capital to explore our franchise acquisition financing programs.
