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Selecting Your First Franchise


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The number of franchise opportunities is staggering, and they’re not all good ones. As a reporter constantly evaluating various franchises, here are a few bedrock principles for investigating and choosing your first franchise investment.

Attending industry trade shows and franchise expos, we meet a lot of starry-eyed people wandering the aisles with bags filled with brochures and promotional goodies. These shows are great opportunities to meet other people considering franchising, high-power franchise lawyers, members of the franchise media (come say hi!), savvy industry consultants and, of course, franchisors who are all working the show floor to appeal to people just like you.

If it’s your first show, you’ll be surprised how approachable everyone is. Don’t be intimidated by anyone. You will likely leave with phone numbers and a handful of people you could lean on to answer questions you may encounter along the way.

The biggest public franchise events are Franchise Expo South, held in Houston in February, the International Franchise Expo, held in New York in June, and the West Coast Franchise Expo, held in Anaheim, California in November.

After some networking and investigation, you probably have a franchise or two that you’re interested in. This is the time to conduct your own site visit. Find a few locations in your area, and check them out as a customer. It’s easy if this is a restaurant where you can drop in for a quick bite, but you could also pose as a prospective customer at other service-oriented franchises to see how the place is run. Pay attention to the customer service, cleanliness and general vibe coming from the employees. Trust your instincts.

Whether in person or by phone, speak with franchisees who are in the system. Most will be happy to share their experiences—good and bad—as well as provide some basic advice to consider before jumping in. This could be the most important step in your investigation.

Now it’s time to put your reporter hat on, and dig into the company’s franchise disclosure document, commonly called the FDD. This public document contains valuable information including a company’s recent cash flow, upfront and ongoing costs for franchisees, background (and litigation history) of the management team, training required to open and operate, details for how to terminate a franchise agreement with the company and, significantly, a list a franchisees who have left the system in the previous 12 months—including contact information. Cold call some of these former franchisee and ask about their experiences with the brand.

At this point, you’re likely getting excited about one or more brands. For another layer of security, speak with a franchise consultant and/or lawyer familiar with this brand for their take on pros, cons and other things to consider. While some first-timers might consider this to be prohibitively expensive, asking experts for their take can be invaluable.

While this is likely the first step for many, you can’t discount the utility of an in-depth web search on a company. There are several sites that collect franchisee complaints, as well as forums where you can see what current franchisees are grumbling about. Expect a lot of complaints, and take some of them with a grain of salt, but this is how you determine if a franchise passes the smell test before handing over your life savings.

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About This Blog

The latest news, opinions and commentary on what's happening in the franchise arena that could affect your business.

Laura MichaelsLaura Michaels is editor of Franchise Times. She can be reached at 612.767.3210, or send story ideas to lmichaels@franchisetimes.com.
 
Beth EwenBeth Ewen is senior editor of Franchise Times. She can be reached at 612.767.3212, or send story ideas to bewen@franchisetimes.com.
 
Nicholas UptonNicholas Upton is restaurants editor at Franchise Times. He can be reached at 612.767.3226, or send story ideas to nupton@franchisetimes.com.
 
Mary Jo LarsonMary Jo Larson is the publisher of Franchise Times Magazine and the Restaurant Finance Monitor.  You can find her on Twitter at
 twitter.com/mlarson1011.
 

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