Being armed with the right research and information is critical when selecting a franchise to invest in. It’s important to have a strong understanding of the franchise’s financial performance, the customer experience and the level of support the franchise receives from the larger corporate team so that you can be certain you’re making an informed decision.
This list of best practices offers key insights on what to look for during the selection process to ensure you pick the franchise that best fits your professional and financial outlook.
1. Do your research
Conduct an internet search of the franchise you’re interested in to learn more about its reputation and how the brand is perceived. Scour news articles and customer reviews on reputable sites like Yelp and Google to understand the public’s opinion about the franchise. Do the results show that there have been consistent complaints or do people sing their praises? You’ll want to invest in a franchise that is in good public standing and has a strong reputation for service. Here are 10 questions designed to help you determine if franchising is the right move for you.
2. Develop strong relationships
The franchise’s Franchise Development Consultant (in some cases called the Director, Specialist or Officer) will seek out and connect with prospective franchise owners and help them learn more about the franchise. They will be a key contact for you throughout this process and will answer any questions you have about the franchise and its parent company. It’s important to develop and maintain a strong relationship with them as you conduct your own research about the franchise.
3. Engage with the Better Business Bureau
The Better Business Bureau (BBB) rates businesses based on the strength of its business practices and commitment to customer satisfaction. How the BBB rates your prospective business serves as a reflection of how well the business is running and is important for any prospective owner to know.
4. Track franchise performance
The Small Business Administration (SBA) showcases franchise performance data and provides information about the amount of loans made to each SBA-approved franchise and how many of those loans defaulted. Visit the SBA website, contact your local SBA office, or contact the Valley SBA National Franchise Lending Group to learn more about the loan information surrounding the franchise you have in mind.
5. Obtain a Franchise Disclosure Document
A Franchise Disclosure Document (FDD) provides the prospective franchisee with information about the franchisor, the franchise system and the agreements the franchisee will need to sign to take ownership. It’s an extensive and important document that helps the franchisee make an informed decision about investing in the franchise. This document is standard practice and does not mean that you have financially committed to anything. Franchises must provide you with the FDD; however, most franchises will not give you the FDD until your application for ownership has been submitted.
6. Contact current franchisees
Connecting with current franchisees is a great source of insight and should never be skipped. You’ll want to ask these folks what they most like and least like about the franchise, if they’ve encountered any challenges and if they’re happy with their investment. Talking with current franchisees is an effective way to understand what their daily operations look like.
7. Visit multiple locations
There will be several franchises that will have you visit their best location; however, you should also visit a few other locations to get a good understanding of the franchise’s overall performance.
8. Attend Discovery Day
Discovery Day is an in-person or virtual event for invited prospective franchisees to meet with the corporate executive team, learn more about the company’s mission and values and hear how the company plans to set its franchises up for success. It’s a great opportunity to determine if your professional values and goals match those of the company’s. Before attending Discovery Day, be sure to have read the FDD and use this visit as an opportunity to understand the company’s long-term goals for franchise support. Importantly, you should only attend Discovery Day if you are 90% sure that you are ready to proceed with the transaction, as this visit will serve as an indicator that you are very serious about moving forward.
Following these best practices will help streamline the selection process and ensure that you’re capturing the necessary information to make an informed decision.
