Things To Do Before You Buy A Franchise
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I’m Donna Bordeaux with CalculatedMoves.com. When buying a franchise, you really need to make sure you consider what it is you’re buying and be very careful in this process. There are a lot of cases that we’ve dealt with where clients have not received what they wanted to and the end result in franchises. Hopefully, yours will not be that case. So we’re going to give you a few steps to check out, to evaluate whether a franchise is for you or not. So first off when buying a franchise, the name is very important. One of the biggest reasons that you may consider buying a franchise is that the name means something to somebody else. If the name of your business as a franchise is not recognizable to somebody else, you may not have the marketing power. You think after all, what’s the difference between Subway and Joe’s sandwich shack.
People will go to Subway because they understand the consistency factor of what the product looks like. What they’re going to get, what their experience will be. Joe’s sandwich shop may be the best thing since sliced bread, but you don’t know if you’re not from that area or haven’t experienced it well. And some people just aren’t into experiencing things that they don’t know about. So watch for the name recognition aspect. And really that is the number one thing that you’re buying. When you buy a franchise, even though a franchise will tell you something else, the number one value factor is the name. Is it recognizable? Number two, is there something that, that franchise can give you that you can’t get anywhere else? Keep in mind that the alternative to a franchise is to open your own business. But even if you don’t have the knowledge on how to do it, hire a consultant, you’ll pay that consultant for a period of time.
And then guess what? You stop paying them, use their expertise to leverage that, to set up your business, but only pay them while they’re giving you that expertise. A franchise is an ongoing contract where you play royalties, no matter what some franchises are better than others. Some have great resources to fall back on. Others kind of go to sleep after they get your money. So we want to protect you here. So look at what that franchise offers you. What is it that you can’t get yourself? Do they have a training facility where they’re training potential employees and feeding them up to you? Do they have some sort of a marketing system that would be very difficult or expensive to duplicate on your own? What do they have that is paying you for those royalty fees that you can’t get somewhere else. So be careful and check that out.
Another really important factor to look at when you’re investigating franchise is once you get to the point of the UFOC, the Uniform Franchise Offering Circular, take a look in there. There’ll be a page that shows, either canceled or terminated franchises. Those are the people you want to investigate. You want to make some calls. Everybody has their shiny list of franchises, but do your homework definitely call several of the current franchisees, ask them these same types of questions. What is it that you get from the franchise or that you couldn’t get anywhere else? Why is it valuable to be a franchisee rather than doing this myself? When you talk to the terminated franchisees, now they’re going to be a little more difficult to get ahold of, but do your research, do your homework. You will find some details about it. Find out why they left and really take into consideration their positions because we want to be able to read any warning signs that may exist before you spend all your money on this.
So look at that franchise listing, talk to the terminated franchises or do your homework on them. Find out why they left. What were the problems? What were resolved? I will tell you some of the common problems that I see in franchises that are not very sophisticated franchises, or maybe newer, newer franchises. Typically don’t have the systems and operations structure in place that they really truly need to be a franchise. Some are jumping the gun because they realize they have a big opportunity and they don’t want to miss out from a timing aspect, but they may not have that whole process curated enough that it is really worth the value that they’re charging. So investigate, look at what it would cost to have a consultant rather than a franchise determine what the franchise name recognition gives you and what that franchisee can give you that nobody else can.
That’s what you really want to take a look at. Also, look at their lead up their lead generation. How do they feed that information to you? What if there were other franchises in your area? Do you have a distinct area that belongs to only you that’s territory and understand that they can put one down the street from you or whatever distance they’d have to be, make sure that’s a part of the contract and not just a statement by the franchisor. So, I hope those tips help you when you’re investigating a franchise. It is a big thing cause you’re going to spend a lot of money right up front. So do your homework. I’d be happy to talk with you and help you evaluate the franchises you’re looking at to make sure that you get the right fit and the right business for you. Again, I’m Donna Bordeaux with Calculated Moves. Please follow us on YouTube for more videos like this one, as well as on Facebook and Instagram have a great day.
Donna Bordeaux, CPA with Calculated Moves
Creativity and CPAs don’t generally go together. Most people think of CPAs as nerdy accountants who can’t talk with people. Well, it’s time to break that stereotype. Lively, friendly and knowledgeable can be a part of your relationship with your CPA as demonstrated by Donna and Chad Bordeaux. They have over 50 years of combined experience as entrepreneurial CPAs. They’ve owned businesses and helped business owners exceed their wildest dreams. They have been able to help businesses earn many times more profit than the average business in the same industry and are passionate about helping industries that help families build great memories.