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Franchise Selection Process

Selecting the right franchise and becoming your own boss takes a number of careful steps. This process may be different than what you thought and should be followed given the importance of your decision. The following represents the appropriate steps to franchise ownership:
  • Self-Evaluation: Ask yourself what you really want to achieve by owning a business. Things like, hours you want to work, what kinds of things are you good at and like to do, how much money can you afford to invest and what returns you will need to produce from the business are essential to your search. Also, give some thought to where you want to live and operate your business, as well as what your exit strategy might be in the future.
  • Funding: Given today's capital markets, you'll need to have a clear idea of how much money will be available to you. Unless you're sitting on a mountain of cash, start the funding and financing process early on because the answers can be quite different from what they were just a few years ago. For more on funding, review FRANCHISEE FUNDING.
  • Evaluate industries: Don't bother with individual companies at this time, just focus on industry groups or categories. Based on your impression of each of these segments, ask yourself if it appears to meet the desired criteria you identified during your Self-Evaluation. If it doesn't, cross it off. You'll end up with a list of possible industry segments.
  • Identify individual franchise companies: Once you've narrowed down the list of industries, look at individual companies with the category(s) of interest. Try to select companies that have territories available in your desired area. Pick a few companies that seem most interesting or attractive to you based on your Self-Evaluation.
  • Review preliminary information: After selecting a few good matches, review their website and contact them and request basic franchise information. They might send you brochures, videos or other materials. Determine if, based on this further information, the company still appears to meet your criteria and if they are worth spending more time.
  • Study the FDD: After your initial contact and completion of a qualification questionnaire, the franchisor will typically provide you with its Franchisor Disclosure Document (FDD). The FDD contains extensive information about the franchise, history, litigation the company has experienced, the contact information of the franchisees, and a copy of the franchise Agreement. Review this information carefully and get comfortable with its content.
  • Visit the franchisor: Assuming everything else checks out, visit the franchisor headquarters. This is not a formality. It's a great time to get to know the people who you will be in business with. Use it as a check-and-balance to make sure you are completely comfortable and confident with the company, leadership and business you are about to invest in. Be on your best game. Judgment is a two-way street.
  • Call the franchisees: Existing franchisees are a great source of information. Franchisees do NOT have the same FTC restrictions as franchisors. Referred to as "validation", contact franchisees and ask them all about the business, their requirements as franchisees, their finances and what they think of the company. This is a good tool for evaluating how well a franchisor supports its franchisees and if the business model and plan is realistic.
  • Make your decision: Once you've completed the preceding steps, it's time to make your final decision. If you've carefully followed this process, you can be sure that you've made your choice for all of the right reasons.


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