7 Mistakes You Should Avoid When Investigating A Franchise

Approximately 40% of the retail business in the U.S., covering a huge array of services and products, is conducted through franchised businesses. Franchising is the #1 business format utilized in America…and has been for many years. This format has withstood the test of time and currently used by literally hundreds of thousands of individuals to build their livelihoods.

This post will help you assess if franchising in general—and a particular company—is an avenue for you to consider using to build your livelihood.

Here are 7 common mistakes interested parties make when investigating a franchise.


Mistake #1: They Assume The Franchisor Is Trying To SELL Them A Franchise

Good franchise companies do not sell franchise opportunities, they make candidates qualify to own their franchise. And, the best companies engage seriously in a process of “mutual due diligence”. In this process, the company provides information to you about the business and simultaneously scrutinizes your application to make sure there is a strong MATCH between your objectives/ capabilities/ resources/background/personal situation/desires and the offerings/financial requirements/professional activities of the franchise. Look for companies that AWARD, not SELL, franchises.

SUGGESTION: Be prepared to demonstrate to us that you have the qualifications to build their franchise. In particular, show the franchisor that you have the ability and willingness to learn their system. Learn a lot and ask many questions.

Mistake #2: They Assume All Franchise Opportunities Are Valid, Profitable & “Approved” By Somebody

This assumption is simply not true. The marketplace makes these decisions. You ALWAYS have to do your homework. Make sure there is a solid match between your needs, goals, and situation and the offerings of the business you are investigating. There are more than 1,500 franchise companies in the U.S. Every one of them is different, in terms of:

  • The opportunity they present
  • The trends in the market for the goods and services provided by the franchisee
  • The complete financial relationship between the franchisee and the franchisor
  • The level of investment required to purchase and TO BUILD the business
  • The company’s honesty, integrity, and ethics
  • The leadership of the company
  • How long they have been in business
  • The happiness among their franchisees
  • The legal track record of the company
  • The income-producing ability of the franchised business
  • The hours required to build the business, etc.

Check out every aspect of the business you are investigating, and any other aspects that are important to you.

Mistake #3: They Don’t Keep Their Initial Dreams Burning Brightly

Far too often, bright, energetic, and talented individuals begin to investigate franchises, all filled with enthusiasm, energy, high ideals, a desire to be their own boss, etc. Then a few days, weeks, or months later, they quit investigating. Something happened to derail their desire to overcome the problems they cited earlier. What happens?

Perhaps they think “because I don’t have the necessary capital in my bank account, I can not buy a franchise.” Or, they conclude, “This is not a good time right now…I have to do…whatever…instead”. Or, they are concerned what others might think of them…or they get nervous about leaving the “security” of their job and a weekly paycheck. The reasons are many, and it only takes one to stop a potentially rewarding investigation.

Unfortunately for many of these individuals, they did not ask the franchisor or the consultant about how their “perceived problem” or situation might impact their ability to build the business being investigated. Don’t be afraid to ask. No solid franchisor wants to accept a person who they believe is not going to succeed. If you have situations, talk about them.

Remember, when you investigate a franchise, you are also investigating your dreams.

SUGGESTION: Do NOT stop investigating a particular franchise opportunity UNLESS you are positive that the obstacles you perceive are actually valid. Many times a perceived problem can be overcome.

Mistake #4: They Confuse “Getting Information” With “Making A Commitment”

Sometimes a candidate will stop investigating a franchise opportunity, because they somehow feel that getting more information commits either them or the company to “completing the transaction”. Frankly, good franchise companies do not view the dissemination of information as a criterion for accepting a candidate. Getting and sharing information is simply a wise thing to do. A franchisor needs information about a particular candidate to help evaluate the degree of match between the business and the person.

Remember, nothing happens until both parties authorize a franchise agreement. Up to that point, everything is preliminary analysis. Federal franchising laws are very strict and protect individuals from making a commitment without doing their homework.

SUGGESTION: Turn over every rock. Get all the information you can. Share information about yourself with the company you are investigating. They need to know as much about you as you know about them.

Mistake #5: All Their Investigation Is Done Behind Their Computers

Far too many people think they can investigate a franchise online and don’t make the effort to get out from behind their computer and talk with people (e.g. franchise owners, representatives from the company’s home office team, independent consultants, etc.)

Franchisors look for candidates who have taken the time to learn the steps in their qualifying and applying process and talk with people on the phone and in person. Why? Because most businesses in America still rely on successful personal communication.

SUGGESTION: Ask the respective companies that you are investigating to outline the qualifying and application process for investigating their franchise and then follow the steps they suggest. You will learn more and you will make a positive impression.

Mistake #6: They Don’t Investigate Potential Problems Thoroughly

During the evaluation process, some type of “problem” within the business may surface. For example, an existing franchisee may cite “Problem X” with the home office. In such a case, attempt to validate “Problem X” by asking other franchise owners and the home office about it. Don’t cite franchisee names, but ask the question. Often candidates will find that others do not commonly share the same experience as one franchisee, or that the home office may offer a different perspective. If you find that several franchisees validate “the problem”, then you have something to discuss with the franchisor.

SUGGESTION: Evaluate! Evaluate! And then evaluate some more! Talk with more than one existing franchisee within a company. Take notes. Pay attention. Discuss any concerns or questions with the franchisor. Sometimes the franchisees do NOT have a complete perspective on a particular topic.

Mistake #7: They Don’t Visit The Home Office When Opportunity Is Available To Them

Many franchise companies offer some type of “Discovery Day”. During these programs, qualified candidates are invited to participate in a 1-2 day program that does several things, including: introduces the home office support staff, describes the franchisee support programs, allows for two-way question and answer period, and typically includes an in-depth interview with one or more corporate officers.

Most franchise companies do not consider a person a serious candidate, until they invest the time (and money) to visit the home office. Again, the awarding of a franchise by a solid franchisor is a two-way process.

SUGGESTION: Take full advantage of a company’s Discovery Day program, even if you have to pay for the whole trip yourself. Some companies share the travel costs.

Are you willing to investigate franchised businesses as a possible vehicle to build that new career? If so, we hope these suggestions help you during your investigation process.

Are you ready to move into a franchising career? If you want to discover more about the Bin There Dump That franchise model, contact us. Good luck!

 

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