The next step in buying a franchise is the fun part. It’s not as overwhelming as one might suspect. I recommend starting with 4-5 industries that interest you and fit within your budget.
In large cities, franchise shows come around 1-3 times a year. This is a great way to talk face-to-face and feel the company’s vibe.
One of the benefits of attending a franchise show is you can ask the same question to multiple franchisors and do some immediate comparison analysis.
Usually, franchise shows have emerging franchises with brands that are new and most likely not known in your area.
I have developed a list of questions to ask franchisors that you can download for free. And you will want to know how long they tested their concept and in what areas before franchising.
I promise the franchisor will be impressed with your questioning and it will help you make a more intelligent decision in buying a franchise.
The upside of brokers
Brokers are helpful because they can help you navigate the deep waters of franchising. You can take advantage of a broker’s knowledge and experience by asking questions and bouncing ideas off them. When you ask a franchisor a question, you don’t know if you are getting a straight answer or not. With a broker, you hope you are getting the truth, and in most cases, you probably are, but did you know?
Franchisors pay brokers about $25,000-$40,000 to sell a single franchise. Most of the franchise fee goes to the broker. In some cases, franchisors want to sell franchises so much that they give incentives and bonuses that total even more than the entire franchise fee!
Disadvantage of brokers
Brokers can then push the franchises with the highest commissions.
Many websites on the internet have hundreds of franchises to offer. They do not care which franchise you choose. These sites only make money if you request information about a particular area. They will charge the franchisor a small fee and forward your contact information.
Once you have narrowed your search to 6 franchises or less, it’s time to do some more due diligence.
It’s time to speak to someone directly at each franchise. The first meeting is often just a get-to-know-you meeting which can include questions about your time frame, desire to open up a franchise, and background.
They will likely send you an eBook of information and plan for a more extended meeting soon after.
It is also not unusual for the franchisor to ask the candidate to fill out a credit application.
TIP For Buying A Franchise
Don’t hesitate to give a broker or franchise your contact info. Buying a franchise should not be, and rarely is, a high-pressure sales pitch. Instead, it should feel like you are entering a business relationship with a coach.
Expectations Form The First Meeting
The first official meeting is an opportunity for the franchisor to open up the hood of their franchise and show you the engine. It’s hard for this process not to sound like a sales pitch. And it is, but it will outline everything the franchise offers. It’s a timeshare presentation with absolutely no pressure.
After this meeting, they couldn’t sell you a franchise even if you begged them.
If, after this meeting, you are still interested in the franchise, they will offer to send you an FDD and ask you to fill out a credit application.
The franchise disclosure document, FDD, has all details of the Franchise Agreement.
In short, FDD explains what is in the Franchise Agreement.
There are 22 items in this contract, and each item covers a different topic in a particular language.
Everything you ever wanted to know about their franchise is in the FDD.
Comparing FDDs is very important and, fortunately not very difficult. All FDDs have their information in the same place.
Please make sure any verbal promises that are not included in the Franchise Agreement are included as amendments.
Strange But True:
To prevent a candidate from making a poor decision, candidates must wait two weeks after receiving the FDD before they can sign it. The date will start when the candidate signs a receipt page. Agreements could be void if the franchisee did not sign a receipt page stating that you received the FDD on a specific date.