5 Steps To Buy A Franchise

If you want to know how to buy a franchise, it’s probably because you want to benefit from investing in a business that has a proven model for making money, with the training, systems and backup to make entry into your new business a smooth ride.

The trouble is that not every franchise is created equal – some of them will tell you the right things just to get your money from you. This article explains the five simple steps you need to follow to make sure you’re successful with franchises as a route into business.

Step 1 – Keep your own counsel: the franchisors have largely got things sewn up to make their life easy. With all the money on their side, it’s sensible for them to stick together and hold a common line. The banks, along with many solicitors and accountants, have been convinced of the value of franchises too – let’s face it, they make good money from franchisees taking loans and paying fees for various service, so it’s in their interests for franchises to get sold.

And of course watch out for “franchise consultants”. Some of these are little more than freelance salespeople who’ll make a healthy lump of any fee you pay over to the franchisor for your franchise license. You would be a lot better off paying by the hour for advice, rather than having a commission based service – they’ll be a lot more honest about the merits of a franchise, rather than doing the best deal for themselves.

Step 2 – Decide why you want to be in business: are you buying a franchise because you want to work for yourself, or because you want to build a substantial business that you can leave to run itself, so that it makes money for you while you’re not there? Once you know this, you’ll be able to look for the right kind of franchise. For example, if you just want to have a good profitable self-employment, there are franchises that can help you with that. Just remember that you’ll have to arrange breaks in your work so that you can take holidays.

Step 3 – Create a shortlist of candidate franchises worth buying: the reality about the majority of franchises is that they aren’t worth having – the systems are unproven and the franchisor only makes money from selling franchise licences. You need to buy a franchise where the franchisor is only successful because of the revenues they make from successful franchisees. This way round, the franchisor has a great incentive to help you achieve success.

Step 4 – Play two or three franchisors off against each other: when you’re ready to negotiate and buy. don’t tell your “favourite” franchisor that you want to buy their franchise. Keep them on their toes by letting them know you are considering them along with several rivals. Tell them that you will buy the franchise that shows most flexibility and support to make you successful, and that has the most balanced franchise agreement.

Step 5 – Eliminate unbalanced parts of the franchise agreement: the purpose of the franchise agreement is to stack the deck in favour of the franchisor. They want to protect their business intellectual property and in some cases they will look to protect their growth and revenues, regardless of your success. Just make sure that you have equal rights to get out of the franchise agreement, so that the agreement is not too one-sided in favour of protecting the franchisor and taking away your rights as the consumer.

If you want to learn more about how to buy a franchise, you are advised to use the systems described in detail in The Franchise Opportunity Workbook.

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