How Do You Invest in a Franchise Opportunity?
Investing in a franchise opportunity can be fun and rewarding. Franchises are excellent investment opportunities because they offer a turnkey business with a proven record of success. That means the learning curve is drastically reduced. In most cases, anyone who can read an instruction manual and follow directions can turn a franchise investment into a profitable business in a reasonable amount of time. Moreover, because the franchise industry has a proven track record, success is almost guaranteed.
Many people have no idea about the franchise opportunities that are available, nor do they have a clue how to go about investing in one. However, opportunities abound, and getting started with a franchise is not a complicated process. All that is needed is a little knowledge. Since knowledge is power, this guide will provide a roadmap to investing in a franchise opportunity. With some perseverance, that power can turn into profit.
The Ten Steps in Invest in a Franchise
- Research the Opportunities
- Explore the Financing
- Find the Right Fit
- Seek More Information
- Ask for Clarity
- Visit Existing Franchises
- Study the Disclosure Agreement
- Sign the Contract
- Train with the Pros
- Have A Grand Opening
The Ten Steps Explained
There are many different franchise opportunities available, and finding the right one is the most important thing you can do. A franchise takes a considerable investment of time and money. Also, many investors are personally involved in the daily operations of the business. Therefore, it is essential that the opportunity is a fit for your lifestyle, finances and interests. If you choose a company that requires a substantial investment, you will need to make sure you have the resources available or can secure them with a loan. Many franchises (or lenders) will only allow financing on a portion of the franchise fees and start-up costs, requiring you to put some cash up front. Moreover, you need to be sure the franchise will be able to return that investment in a reasonable amount of time. Also, you will want to be sure that the monthly or yearly revenue will be enough to uphold your desired lifestyle.
However, there are more than financial considerations when choosing a franchise. A franchise that requires 60-hour work weeks, including weekends, may not be a good fit for someone who wants Saturdays for the beach and Sundays for rest. Also, it could be hard to run a restaurant franchise if you don't like the food that they serve. The best option is to choose a business that holds some interest so that you look forward to going to work each day.
After narrowing down the niche market, it is essential to get more specific information about the franchise. This information can be collected by contacting the franchise and requesting additional information. The franchise should have videos, brochures or online information. It is also helpful to visit existing franchises to verify claims. If there are areas that are difficult to understand, ask questions for clarity. Get as much information as possible about the potential franchise before making the final decision.
Once finding the perfect fit, carefully study the Franchisor Disclosure Document (FDD). The FDD is a government mandated document that contains extensive information about the franchise, including history, previous litigation and a copy of the contract. The franchise will provide this document after you fill out a preliminary application. This process also helps both parties determine if there is a mutual fit.
When everything checks out, you've taken ample time to study the FDD and both parties have agreed that the franchise is a fit, there will be a franchise agreement or contract to sign, and payment must be made to finalize the deal.
At this stage, the franchise organization will provide all the training necessary to conduct business. This training should include everything you need to know about financial operations, site selection, managing and ordering inventory, day to day operations, hiring staff and more.
Once the training is complete, you will take the necessary steps to open your storefront. Actions could include renovating an existing building or building a new one. Again, everything you need to know to accomplish this will be covered in training. Once the storefront is operational and ready to serve customers, it is time for the grand opening of your franchise.