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- 8 Steps to Buy a Franchise
You have decided to take control of your destiny.
You want the opportunity to build massive wealth & cash flow.
You do not want to start from scratch and go alone. You choose a franchise with a proven playbook and built-in support network. Now it's time to turn your thoughts into reality.
Here are the 8 steps to buy a franchise.
Every franchisor is a little different in their sequence but all follow a similar process.
Step 1: Research
The first step is researching what type of franchise best fits you. This process can be overwhelming with over 3,000 franchises in the US.
This is where my team of expert franchise consultants comes in. We work with you 1-1 to find franchises that match your budget, goals, skills, and is available in your market.
You don't want to waste time looking at franchises that aren't available or aren't a fit.
Our consulting service works like a buy-side real estate agent, 100% free to you and only getting paid a referral fee by the seller (franchisor) if you fall in love with a brand. We also provide tools, checklists, and resources to give you confidence in your decision.
Step 2: Franchisor Introduction
The first call with the franchisor aims to get to know each other. They want to understand your background and goals in owning a franchise.
Every franchisor is different in its expectations of franchisees. Many require owners to work hands-on daily to grow the business: hiring, training, selling, managing the team, etc.
A few allow semi-absentee ownership, where the franchisee treats the business as their 2nd or 3rd priority.
If you're planning on being a semi-absentee, there's no point in continuing the conversation with franchisors that require full-time focus.
Step 3: Unit Economics
The franchisor will review the business model in depth on the next call. They go over the history of the company, its products/services, competitive advantage, target customers, & more.
They review the start-up costs, which always have a low to high range depending on several factors.
They also discuss earnings. Each franchisor decides how much financial performance they disclose. Some report sales, gross margins, and KPIs. A few report full P&Ls or absolutely nothing
Step 4: Territory Mapping
Next you start to review territories or trade areas for retail locations.
You'll look at demographics, income, housing value, and more. Franchisors have very specific criteria they are looking for in creating a territory. The criteria could include owner-occupied single-family homes, total population, number of seniors over 65 years old, etc.
The smaller the franchisor, the more flexibility you have in picking your territory
Step 5: FDD Review
The FDD (Franchise Disclosure Document) is a 250 to 500-page contract you sign to join the franchise. Every FDD is organized in the same format with 23 Items (chapters). The uniformity makes it much easier to read and compare franchises.
The FDD will cover estimated start-up costs, royalties, fees, territory protection, approved and restricted services, renewals, termination, and any legal/bankruptcy issues the franchisor has had. It includes audited financials of the franchisor and contact information for current & former franchisees.
The franchisor will send you this document early in the process. On this call, they review any questions you have or walk you through the entire document, item by item.
Step 6: Leadership
Up to this point you've most likely dealt with the franchise sales team. Once you are closer to approval you can speak to the leadership team: The Founder, CEO, President & anyone else they choose. You must meet the leadership to get an understanding of the 5, 10, and 20-year plan for the franchise.
The quality of the leadership team in emerging franchises is more important than the business model. You could have the best business model in the world that will go nowhere if the leadership team can't execute.
Step 7: Validation
During the validation step, you speak to existing franchisees. You want to ask about the training, support, sales, margins, & profit. Some franchisors will schedule and record these as group calls, giving you a library to watch. You can also set up 1-1 calls with specific franchisees.
These calls aim to validate everything you've learned up to this point. If you speak to franchisees too soon, you won't know 50% of the questions to ask. Plus the franchisor doesn't want to waste their franchisee's time with candidates who aren't serious.
If you work with my team we will provide you with a list of 20+ validation questions to ask other franchisees to ensure you cover all the bases.
Step 8: Confirmation Day
The final step is Confirmation Day (some call it Discovery Day). You will fly to HQ to meet everyone in person or they will host it via Zoom. You will meet all the department heads and get a behind-the-scenes look at the business.
You are deciding after this day: signing the franchise agreement and moving forward or not. Unless there are major red flags, most people are ready to rock & roll after this day.
Timeline
You can move pretty fast if you find a franchise you love — as quick as 30 days from introduction to signing.
You can stop or slow down this process at any time. A good franchisor will move at your speed. Don't let them push you faster than you want to move. Keep in mind that emerging franchises grow quickly. You could lose your desired territory if you drag out the process too long.
Connect
If you want free help in finding a franchise start today by booking a call with my team
On my podcast, Business with Beers, I interview franchisors, franchisees, & do deep dives into specific topics.
Cheers!
Brian Beers