How to Select a Small Business Franchise That is Right for You

Written by Whitaker Stacey

Selecting a franchise can be a difficult decision; evaluating your own interests, talents, and aspirations, and then researching potential franchises to see if they align with you personal business goals is the smart way to choose the franchise that’s right for you.

Making the decision to open a small business franchise is a monumental step. Now it’s time to make an equally important decision—just what type of franchise do you want to run, and what specific franchisor will you work with? These aren’t easy decisions to make. Taking it one step at a time while being sure to devote the necessary forethought to each step is a recipe for an enjoyable and profitable business plan.

Step One: Choose a niche you’re interested in.

Although the majority of people get into franchising to make a buck, there are other things to consider besides the bottom line. When choosing a franchise, be sure that the venue is something that you have some degree of interest in. If you like your job, the product, and the clientele, it will show, and more than likely, it will help you make a profit as well. You should also consider your own personal values as well as your strengths and weaknesses. It’s important to find a franchise that is compatible with these personal characteristics in order to have an enjoyable and profitable experience.

Step Two: Strategize.

Once you’ve chosen a niche, you need to make a personal business plan before going any further. Once you begin talking to franchisors, it’s easy to get caught up in what they’re promising you and forgot what propelled you into this whole thing to begin with. To prevent this kind of distraction, decide what your short and long term goals are and develop an exit strategy if the business goes belly up. Then, write out an actual strategic plan detailing what you want from your business and how you plan to get it. Take this plan with you to every meeting you have with a prospective franchisor. It’s an important to have a firm grasp on your goals before beginning the process.

Step Three: Research local franchises including their profit margins.

This research should begin by reading the Franchise Disclosure Document (FDD). Franchises are required to make these available, so you shouldn’t have a difficult time getting one. These documents are filled with their share of legal mumbo-jumbo and fine print, so it may be a good idea to get your attorney or similar professional to look over it as well. Item 19 of this document should give you some insight into the profit margin of the franchise, a big factor to consider before investing your valuable time and money.

Step Four: Talk to the franchisor directly.

A face-to-face meeting with the franchisor will give you the opportunity to ask the most pressing questions on your mind to determine whether the franchise is right for you. Think of it as an interview for the franchisor. In addition to basic questions dealing with strengths and weaknesses of the franchise and the like, ask about how the corporation handles conflict and why they think some of their franchises fail and others succeed. The answers to these questions should give you some insight into the business practices and values of the franchise. In addition to questions and answers, you should carefully consider what other information the franchisor does and does not provide. If, for instance, the franchisor touts profit margins that are incongruous with the ones on the FDA, you have a reason to be concerned. Franchisors that say one thing and report another in terms of financial matters tend to be shady business people—just the kind you don’t want to become involved with.

Step Five: Talk to your potential colleagues.

The very best way to find out what kind of experience you’re likely to have with a particular franchise is to talk to others who own them. Make some calls or do the rounds, whatever you have to do to get the information you need. Ask them about what skills are most important in their jobs, what challenges they’ve faced, what their relationship is like with the franchisor, and any other inquiry you want a straight answer on. You’re more likely to get an accurate answer from fellow franchise owners since they have nothing to lose by telling you the truth.

Conclusion

Purchasing a franchise is not something you want to jump into. Doing some introspection as well as some informal and formal research on the franchises you’re interested in will help you make a decision that is most likely to result in the short and long term goals you’ve set for yourself.