How To Select The Right Franchise

by - 9:14 AM

Is the right franchise waiting for you?

After working for somebody else for a number of years, many people decide they want to own their own business and millions look at franchising as an option, but how do you select the right franchise?

If you are searching for the right franchise business make sure you ask yourself these 6 most important questions before you commit:

1. How Much Does It Cost?

This might seem to be the simplest question, but Franchisors have many fees that you need to be aware of. The initial franchise fee is just the beginning. Do you know how much the royalty fee will be? Does it include advertising? What about the build-out of the store? Most Franchisors will quote a range, say $150,000-$600,000 and this is mainly due to the location and the necessary work that must be done to the building in order to open.

2. How Much Money Can I Make?

Every Franchisor is required to have an updated Franchise Disclosure Document (FDD) on file and as a prospective franchisee; this document must be disclosed to you. The problem you may have is finding someone to help you read and understand this because an attorney normally compiles an FDD. If you do use a qualified Broker they will direct you to Article 19 where the earnings statement will be.

3. How Quickly Can I Make Money?

All businesses have a ramp up period and this is also disclosed in the FDD. Is the typical store making money after 6 months or will you take a year before you see a return on your investment. Ask your Franchise Broker to help you understand the numbers.

4. What Are Others Saying?

In an era of social media and instant news, Franchisor leaders are very careful about the reputation of their brand. As a prospective partner ask yourself if the values of the Franchisor are in keeping with your own. Many business models require business owners to work 7 days a week and if your values are such that family time is more important than working at your store, you may want to reconsider the choices you are making. A good Franchisor Broker will lead you through a validation process where you will see the in depth values of a franchise.

5. What kind of support will I receive?

The Franchise Disclosure Document will reveal the number of stores the parent company has opened in the past year. It will also disclose the number of failed stores and this is an important number to consider as it points to Franchisor support. Ask your Broker to help you with some insight as to how a particular Franchise business is doing.

6. Can I see myself doing this?

Picture yourself making hamburgers or supervising a team who are flipping the burgers. Picture the long line waiting for your new store to open. Not a fast food franchise person? Maybe another concept is a better fit for you. Will you be hands-on or will you be absentee? Can you absorb and compute financials and make a quick decision as to the operation of the business? Ask yourself, your friends and your family how they feel about your decisions and think about the right franchise business fit for you.

Most Franchisors use consultants or brokers to advertise their brand and to bring in potential buyers to grow their business, but not all brokers are created the same. Chuck Machado is a seasoned Restaurant Broker and is a member of the International Business Brokers Association (IBBA). He is also a member of the Franchise Brokers Association (FBA) with advanced training in franchise business sales. He holds a California Brokers License # 01937825. You may visit his website

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