How to Find the Right Franchise as an Investor

If you’re considering investing in a franchise, these are the five steps you must follow to ensure that you invest in the right franchise for you.

5 Steps to Success as a Franchisee

As an executive in career transition, you may be considering a more entrepreneurial route. Owning your own business gives you greater freedom than you have on the corporate merry-go-round. 

A popular choice is investing in a franchise opportunity, but how do you know which is the right franchise for you?

Why invest in a franchise?

As an entrepreneur, you could start your own business from scratch or buy a franchise. As a franchisee, you use the franchisor’s business model and brand name to build a business. You’ll pay a franchise fee and ongoing royalties, and benefit from training, support, and the brand recognition that the company has developed over many years.

Starting your business as a franchisee is often faster than starting a new business. This means your investment is put to work sooner. Your business benefits from help from the franchisor, helping you build with the use of tried and tested marketing, access to pooled resources, and bargaining power of the franchisor positively impacting cost of supplies.

How do you find the right franchise – the needle in the haystack?

The franchise market in the United Sates is huge. In 2019, there were around 773,000 franchise establishments across the nation, delivering more than $785 billion of economic output. With so many franchise opportunities available, finding the right one for you is not an easy task.

The secret is to personalize your approach. Your investment should center around you first, the business second. It’s a formula that our experience tells us helps potential franchisees like you to make successful franchise investment decisions. Here are the five steps in the process.

Step #1: Assess your skills and experience

You’ll be running a business. While the franchisor should provide training and support, your existing skills and experience will help you decide what type of business you should invest in and if you have the business acumen you need.

It’s not only about assessing your hard skills, either. You should consider your soft skills (such as communication and people management) and whether you possess the entrepreneurial mindset. The New Ground Consulting Franchisee Assessment is scientifically proven to delve into your mindset, even delivering an outline of the type of franchise business that is likely to most suit you.

Step #2: Establish your goals and expectations

What do you want to get out of your new business? Are you prepared to take a full hands-on approach? Are your salary expectations realistic? Do you want to be more passive in the business, relying on managers to run your business’s day-to-day operations?

You’ll need to consider your time commitment as well as your earning expectations, and you should also consider your exit strategy. Yes, even at this early stage you should plan how to say goodbye to your business. A UBS Investor Watch Report found that more than half of business owners want to exit their business by selling it. Other options include leaving it to family and closing it. Incredibly, one in 10 aren’t sure of their exit strategy.

Step #3: Be sure about financing

Most successful franchisees don’t borrow funds to invest in a franchise. They may already have the cash available – either as cash or in underperforming investments – or find other ways to finance their franchise investment. 

You’ll need to decide how much you want to invest and where you will source the funds. A popular option is leveraging your 401(K) to buy a franchise.

Don’t forget, too, that you should plan to cover lower profits during the first few months as your business establishes itself. Knowing your financial commitment in advance will help give you peace of mind and narrow the potential franchises for your investment.

Step #4: Make the trend your friend

Now it’s time to start searching the market for franchise opportunities that suit you, your pocket, and are most likely to achieve your goals. Here’s where we recommend consideration of current franchise industry trends.

When you’ve established the best franchises to buy, you can delve deeper into factors such as location and the franchise businesses that are best matched to you, and the industry trends you have identified as the best choice.

Step #5: Research your shortlist

Make a shortlist of the franchise businesses you are now considering for investment, and do your research. Learn as much about the businesses as you can.

We recommend that you connect with other franchisees in your shortlist to get their views on their investment and their business. Ask about the support they receive from the franchisor, the culture, the training, and marketing provided, and any other factors that may have bearing on your success.

Before signing a contract, you’ll need to review Franchise Disclosure Documents. These will include details such as litigations, bankruptcies, turnover, etc. We recommend that you enlist the services of a good franchise lawyer to help you.

Never go it alone

Deciding on the right franchise for investment is not a process that you should do alone. Even seasoned franchisees enlist the help of experienced, unbiased franchise consultants. 

At New Ground Consulting, we always start with the franchisee assessment. This is always the first step. It is crucial to understand your strengths before going further in your journey. We’ll help you develop your goals, understand your finance options, and then start market assessment with you. Finally, we will present our recommendations.

Please feel free to ask us about the successes that our clients have had (you can read about a couple here).

If you are considering investing in a franchise, make the first step – take the 5-minute franchisee assessment. Alternatively, book a free franchise consultation.

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