The Daly Coach shares her top 10 tips for buying not just any franchise, but the the right franchise for you.
- Buy people, not products or brands.
A franchise is a partnership. You are buying a leadership team and their vision for the future. Don’t buy a franchise for what it is today but for where it is going. Does your franchisor partner have the capital, talent and vision to champion their market?
- Choose a business you will enjoy, but not love.
A business should not be a hobby. A franchise is an investment vehicle that can drive your life personally, professionally and financially to a new place. Pick the most efficient vehicle that will get you from where you are to where you want to be and still leave you time for the things that really make you happy.
- Match the business to your skills.
Before you start exploring a franchise, consider what core skills are needed in that business for top performance. If it’s sales and networking, and you don’t like meeting people and closing sales, you will probably not be successful no matter how much you like the product or service. If the business requires a large staff, and you don’t enjoy managing people, you will probably never enjoy your business. Consider what you enjoy doing when you’re working and select a business that will align with your skills.
- Invest in a business you can afford.
It won’t matter how skilled you are at what you do—if you don’t have enough working capital to support your ramp up — you will fail. I try not to put more than 1/3rd of a person’s net worth at risk when coming up with a comfortable investment range. Of course many factors play into risk tolerance such as age, experience and one’s natural predisposition for risk -some people are more adventurous and some are more conservative, but in general my 1/3 rule works, so if you have $1M Net worth, the maximum investment range I would look at would be around $300K per unit. In my opinion, you shouldn’t be betting the farm to start a business. If the risks are too high, you probably won’t be able to say yes anyway, so invest your time in exploring opportunities that you can comfortably afford.
- Follow the franchisor’s lead during your investigation.
When you invest in a franchise, you are buying people, systems, tools and support. Franchisors do not discuss their culture, vision, momentum or put their “secret sauce” on the internet for all the world to see. The only way to really explore a franchise is to be in relationship with the franchisor. Outside advisors, family and friends who are not going through the same process as you will mean well, but very often will not have the facts to help you make a business case. Take the franchisors hand and let them guide you through an investigation of their business. Your ability to be led as you explore may be indicative of your ability to be led once you are a franchisee. Follow the franchisors lead and let them teach you about their customers, tools, technology, support and opportunity.
- Validate the system through top performers.
I always tell my candidates you don’t need any help saying no to this opportunity but you probably do need help to say yes! So calling owners who are failing is a waste of time as they will only validate to your fears. Focus your validation calls on the top performers in the group because they have what you want! They are the role models. They know what drives top performance thus they equally know why people will not be successful in their business. Validation should be fun and is an important part in your due diligence process. Other owners’ experiences should not limit your thinking about what’s possible but rather inspire you toward what you want to achieve.
- Build relationships first then read the FDD.
Since franchising is a partnership there has to be a legal document that establishes performance standards and expectations for both parties, but by no means is the FDD a reason to not invest in a franchise. You are investing in people, tools, systems and their vision. You can’t read an FDD and understand the culture of the brand or who the competitors are or their future plans for market domination, so why turn to the FDD until you know you want the partnership? An FDD is not an inspiring document, and you need to be inspired in order to invest. Get inspired by building a relationship with the franchisor then validate that relationship through the experiences of the current franchisees and then cement the relationship legally by understanding the FDD and the terms of the franchise agreement.
- Use Discovery Day as the final step in your investigation.
Attending a discovery day is an important step in your due diligence process. It is the final step in the mutual evaluation process and should help you confirm what you already believe to be true based on all the work you’ve done at home. A discovery day should be YOUR closing tool to bring together the logical business case you’ve built through your due diligence and your excitement for the opportunity. If you go to discovery day when you are 80% sure this is what you want to do, you should leave with another 10%. I don’t think you will ever be 100% sure because there is always that leap of faith that has to be made. Attending two discovery days with the hope of picking the best company is a waste of your time and resources because by needing to attend two discovery days, it already indicates you have not completed your process at home, and you may be looking for something that you are never going to get in this process. The discovery day is not only your opportunity to meet the team, but it’s their opportunity to meet you. Franchisors are looking for team players who are coachable and who will fit into their culture. Ultimately, it is the franchisor’s opportunity to award to you before it is yours to buy. The discovery day is an important part of your due diligence and is best used as the final step in the mutual evaluation process.
- Complete your investigation in 4-8 weeks.
While I do equate exploring a franchise to a courtship leading to a marriage, I don’t recommend taking years to commit to your decision. Commit to being a business owner first, then — begin exploring franchise businesses matched to your skills, finances and goals. Follow the franchisor’s investigation steps, attend a discovery day and then say yes or no. There is a cadence to this process that is critical to it’s success. You cannot stand at the edge of the cliff to your dreams and look over for too long or you will talk yourself out of taking the leap. Your dreams and the opportunity won’t wait. The best way to know that you’ve done all you can do to investigate an opportunity and feel confident about the decision you are making is to work with an experienced franchise consultant who will outline the research method and coach you through it 4-8 weeks.
- Work with an experienced Franchise Consultant.
An experienced franchise consultant will help you select the right franchise based on matching opportunities to your skills, finances and goals. A good consultant will provide coaching on the process, the FDD, validation strategy and financing resources. A good consultant will leverage experience and relationships to help you find the best franchise partnership for your personality, skillsets and financial goals. A good franchise consultant will identify your fears and help you empower yourself through the process rather than becoming paralyzed by the what ifs. A good franchise consultant will be your confidante, coach and supporter bringing all the pieces of the process together in 4-8 weeks so that you can feel confident that you’re making a great decision.