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The following excerpt is from Mark Siebertthe book of The Franchisee Handbook: Everything You Need to Know About Buying a Franchise. Buy now from Amazon | Barnes & Noble | Apple Books | IndieBound
While the Internet is an excellent tool for advance explorativeit should serve as a basis and not as the only source of information. Combining online research with real-world exploration – such as engagement with franchisorsbrokers, competitors and trade events – will provide a more complete understanding of a franchise opportunity.
Beyond digital resources, visiting franchise locations (both local and in distant markets) allows future Franchises to assess operational quality, sustainability and customer experience. Observing day-to-day operations and comparing competitors can reveal potential challenges or opportunities that are not apparent on the Internet or in promotional materials.
franchisor
Your first source of information about a franchise company will be franchise company himself. It will usually be able to provide you with a wealth of information, including the franchise disclosure document (FDD), franchise brochures or other promotional materials, links to franchise testimonials, and perhaps information on the industry in general.
You can expect franchise salespeople to try to qualify you on the first call. Most will ask you to fill one out confidential information request form (CIRF) and discuss their process for mutual evaluation. Typical qualifying questions will include your capitalization, desired geographic region, and schedule to deploy. Assuming you are serious about investing in a franchise, you need to be honest with your answers.
The seller will then often propose a series of steps that you both go through to learn more about each other. Some of the steps may include a review call to pass FDDmarket visits, phone calls to franchisees and market research for your services. Take advantage of this resource once you are shortlisted.
Related: 3 Reasons Buying a Franchise Can Be Better Than Starting Your Own Business
Franchise agents
Another resource that can help guide you through the process of buying a franchise is a franchise broker. Brokers, who often call themselves “franchise consultants,” can be a valuable tool in helping you evaluate your options.
Unlike a franchise salesperson, a broker is not limited to a single franchise concept and may represent a hundred or more franchisors. In the best networks, the broker is trained to help a prospective franchisee narrow down their choices to a small portion of OppORTuNiTy for which they are suitable.
Typically, you will not pay a fee franchise broker. They provide this service in exchange for a success fee (essentially a commission) paid by the franchisor – usually in the range of $20,000 or more – if an introduction they make results in a sale.
At the end of the day, brokers are a great resource that can provide real value, but they're not the completely unbiased buyer's advocates some would have you believe. So while brokers are a resource you should certainly consider, ultimately you should PROVIDED they have pointed you in the right direction.
Related: Greg Flynn owns 1,245 restaurants and earns $2 billion a year. Here's how he did it.
Exhibition of Trade and Industry
Another great place to get information on franchises you may want to consider is franchising trade show and, if you are searching in a specific field, the industry shows. Franchise shows in particular will give you an opportunity to speak with several hundred franchisors from a variety of industries in just a few days.
These shows have other advantages as well. In general, they provide seminar on all aspects of the franchise – giving you a chance to learn before you buy. These seminars cover topics such as industry trends, understanding contract provisions, veteran franchise programs, financing and overall success as a franchise and are often well worth attending.
Keep in mind that these shows may not provide a representative sample of franchise market. Exhibitors tend to lean slightly toward newer franchises and those with lower levels of investment.
Related: These women-founded franchises overcame a major milestone—against the odds. Here's how they did it.
Industry associations
of website THE International Franchise Association contains a wealth of information on the franchise. In addition to allowing you to search for select franchisors, it provides information on industry suppliers in areas such as finance, insurance, veterans programs, minority programs and the franchise purchase process.
Related: Franchise vs. Independent Business? 12 Experts weigh the options
the competitors
Another thing you should do is visit competing businesses—both franchises and independents—in your community. Drive for a day or two, get online and start taking notes. Who are they? the competitors in the businesses you are considering? How long have they been around? What are their competitive strengths and weaknesses? What is their pricing structure? What kind of locations do they have? Write them all down – this will provide the basis for some good questions for potential franchisees later.
Also, visit any local establishments that are in the same general segment you are considering during off-peak hours. Talk to the staff, who are often surprisingly willing to share information about how the business is doing if handled properly. Get a feel for how these businesses compete in the marketplace.
If you're interested in a business that doesn't have a physical presence, spend your “drive time” online looking at their website. Note their prices and how they position the offer. Try to get a feeling how big their market is. If it's a service-based business, call them and ask for a quote.
Find out what advantages they have and how they will compete with you. Ask them the same questions you asked your target franchisor. What support services can they rely on? What does their fee structure look like? What do they think about the market and the franchisor? Maybe they can tell you something about the company that you didn't already know.
While you're at it, you might also want to visit the locations for your target franchisor in a few distant markets. See if they all run the same way. Do they offer the same products and services and at similar prices? Are their locations set the same? Are they all clean and well-run? If your first reaction is, “I can do a better job than them,” that means the franchisor may not be doing a good job of quality control—and those substandard franchisees will eventually 'represent you, as they will be flying the same flag and telling their customers what they can expect when they visit your location.
Also, try to understand what the business owner or manager does on a daily basis. What may seem fascinating when you read about it online may turn out to be more mundane when you're doing the work day in and day out.
