Buying a franchise

I've been thinking about buying a franchise. Anyone have any good advise and/or resources for me?

Thanks all!

I work for a franchisor (company that sells the business to franchisees), there are a lot of good resources out there on Franchise opportunities. www.franchise.org, is a good one. www.entreprenuer.com has some good info.

The most important things to take a look at when evaluating franchise opportunities is to really carefully read the UFOC, in which the franchisor has to divulge all the terms of the agreement and some performance results.

Take a look at whether the total number of franchises has gone up or down in the past few years. Franchisors must report business failures as lost franchises in any given year (many will try to sell or transfer territories in order to avoid doing so), so if you see that a franchisor is regularly losing franchisees that is kind of a red flag.

Other than that, franchisors are generally legally not allowed to make earnings claims, so if you have a franchise sales guy who is telling you how much you are going to make from the business...be a bit careful.

Other considerations are kind of business specific...if you are looking at a business with a central location, obviously protection of your territory might be an issue. If you are looking at a service business, lead generation is always a concern (does the franchisor provide you with lead generation tools, or leads to get you off the ground?) Without knowing the specific type of business you are looking at it is a bit tough to give you too much info.

Just remember that most franchise operations are not turn-key ready businesses. I think a lot of people have unrealistic expectations and lose sight of the fact that getting any business off the ground is extremely challenging.

A good franchise offers you brand equity, a support network,a solid system for doing business, and great training....all of which helps jump start your business. However, you will be paying them a percentage of sales, or a flat fee yearly...which drives up the sales need for your business to break even. The better the franchise system, the more you have to pay and the better your business had better be.

Thankyou Ryan!!!

Great stuff. Its been saved in my archives. I'm looking into clothes retail.

ttt

Ryan has upsized to the Correct.

From my experience (Business Analyst for Franchise division of a large Bank) there are 2 things that make or break most franchisees: 1/ Site Location and 2/ Support Network.

Site Location is pretty straighforward so I'll just give it a miss. Support Network is more than the Franchisor, rather also think of your family/partner etc and how much assistance, understanding etc you're expecting from them and how much will be too much for them to handle. There are many instances of a successful Franchisee that has ended up poor because they've burned their marriage on their road to success... i.e. everything you do has a cost both in finacial and personal/emotional terms, just make sure the price is right.