Researching a Franchise Opportunity
by Ed Teixeira
When considering a franchise opportunity itís important that individuals
perform the proper research. This should include identifying how the franchisor
qualifies and selects new franchisees.
The purchase of a franchise represents a major decision for the majority of
franchise candidates. Deciding to purchase and operate a franchise, means a
major life style change for most people. In addition, the capital investment
required for a franchise can carry considerable risk. For these reasons itís
important that individuals considering a franchise opportunity perform the
The key steps for researching a franchise should include the following:
- Gain a basic understanding
of franchising. The importance of this knowledge cannot be underestimated. There
is ample information available on the Internet and from various sources
including the FTC and IFA.
- Identify the amount of
capital necessary to invest in the franchises that interest you. Donít rely on
the franchise marketing literature but instead speak to some existing
franchisees and carefully review the Franchise Disclosure Document and the
- Match your business and
personal skills to the requirements of the franchise. Do an objective assessment
of your strengths and weaknesses. Your best choice for a franchise is one that
closely matches your financial resources, business skills and personal
preferences pertaining to lifestyle and interest.
- Utilize the advice and
guidance of professionals. Be sure to engage the services of a franchise
attorney and financial professional once youíre ready to move forward. These
individuals have the knowledge and experience to provide the assistance you
- Objectively evaluate the
credentials and performance of the franchise program. Donít be impressed by the
glitz and glamour of a franchise program. Focus on the operational aspects of
the franchise and especially financial performance by speaking to existing
In addition to these key items, there are other areas that ought to be
considered, but are often neglected.
The time, attention and effort a franchisor places on qualifying and
selecting its franchisees is a way to separate the quality franchisors from the
average or weak ones.
An important component of your franchise research project should include
requesting a profile of an ideal franchise candidate from the franchisor. This
should be done at the beginning of the franchise research process. The objective
is to confirm that the franchisor has a profile of their ideal franchisee and a
method for measuring their qualifications.
An example of a franchise qualification program is represented by
i9 Sports a
childrenís sports franchise, which looks for mid-career professionals, with a
slight nod towards those in sales and middle-management positions. They
use a behavioral profiling tool and look for candidates with sufficient drive,
an ability to work at a fast pace, multi-task, and follow a system. The
ability to relate to people is critical, coupled with basic business acumen
constitute some of the necessary tools for success. Before a visit to the i9
Sports corporate office, potential franchisees view two webinars, complete an
application, are background checked, do a secret shopping exercise which
compares i9 Sports franchise and its program to the local competition and they
are further expected to review the FDD, talk to existing franchisees and
assemble bank and tax records for review by the franchisor. They also work
proactively with candidates seeking outside funding, working with qualified
candidates to create a business plan and cash flow planner, while using the
projections stated in Item 19 of the i9 Sports FDD.
The system utilized by i9 Sports to qualify and select its franchisees is an
example of the approach utilized by successful franchisors that enhances the
success of its franchisees.
When researching a franchise opportunity, individuals need to follow a
specific format and review certain components of the franchise operation.
Understanding how the franchisor profiles and qualifies franchise candidates is
an additional aspect of the research process that should be evaluated..
© 2013 FranchiseKnowHow, LLC
Ed Teixeira is the author of The Franchise Buyers Manual and a 35 year veteran of the franchise industry having served as a senior executive for several franchise firms. Ed was also a franchisee of a multi-million dollar home healthcare franchise. He is the founder of FranchiseKnowHow, a franchise consulting firm.