Purchasing a franchise is an exciting opportunity to step into entrepreneurship with the support of an established brand. But diving into this world requires more than just passion; it demands preparation, research, and a clear understanding of your goals. From evaluating your finances to selecting the right franchise fit, each step plays a crucial role in setting you up for success. As you prepare to buy a franchise - keep this guide by your side!
In this guide, we’ll walk you through 12 essential steps to ensure you’re fully prepared to embark on your franchising journey with confidence. Let’s get started!
1. Get Financially Ready -- Most brands, not all, will want to see a Minimum Net Worth of $200K with at least $75K liquid. (Liquid can include Stocks, Cryptocurrency, etc.) There are brands that will accept candidates with less than a $200K net worth but hitting that threshold will open more doors and set you up for the most success. (We’ve got a couple financial resources you can check out – Franchise Funding or Get the Money You Need to Buy a Franchise
2. Prepare for the Time Commitment -- Are you ready and able to commit the time needed to start a new business? Even if you plan to put a General Manager in place, there will still be a time commitment required of you as the owner. Be sure you are able to leave your current job and commitments or can at least set them to the side enough to embark on this adventure.
3. Get Mentally Prepared -- You need to have your mind in the right place to start a business. It isn't easy, which is why not everyone does it. It takes a high level of grit, determination, and perseverance to be successful. Make sure you are mentally prepared for this new journey. Be ready for ups and downs.
4. Start Thinking - - Once you have passed the first 3 hurdles, the fun really starts! Start thinking about ideas, industries, companies, and business models that excite you.
5. Find Your Support Team - - Unlike starting a business from scratch, when you buy a franchise, you don’t have to do it alone. You can have an experienced Franchise Consultant by your side every step of the way. (For free.) Search out a few, and see who seems like they have extensive experience, and like someone you’d like to talk to quite often along the way. Schedule a meeting with your chosen Franchise Consultant. Their service is free, their expertise is invaluable, and they will help you immensely to start to narrow down available options. (Probably most important about this step – yes, you can go to franchisors directly – but you only get one shot with a franchisor. If you don’t have your ducks in a row, they could turn you down. And yes, that happens often. A franchise consultant will help you get everything lined up so you can put your best foot forward when you finally speak to a franchisor.)
6. Narrow Your Options - - With your Franchise Consultant, you can work to find 2-4 franchise brands that interest, dare we say excite, you and begin the due diligence process with each to learn as much as you can.
7. Review Franchise Disclosure Documents (FDDs) – FDDs hold incredibly important information. Data about franchising fees, royalties, investment ranges, turnover rates, financial performances, restrictions, etc. FDDs often include information about the success other franchisees have experienced as well, which will help you set your expectations.
8. Validation -- Talk with several owners from various parts of the country to see how they're doing financially. Your franchisor will give you franchisees to speak to, but you can do your own networking as well. Are they getting the support, marketing, tools/resources they need to grow a successful business? Do they see a good future? What are their hurdles? Learn all you can from the people already doing what you want to do.
9. Prepare to Secure Financing -- Are you self-funding your franchise endeavor, or do you want to explore funding options? If the latter, this is when you should start reaching out to explore these options. Your Franchise Consultant can give you resources to explore.
10. Discovery Day | Meet the Team Day – You’ll get to visit, in person, with the franchisor to meet all of the support personnel that will be helping you build/grow your franchise in your market. Soak in as much information as you can. This time really gives you a good (hopefully) feeling about the choice you are making.
11. Franchise Agreement – If Discovery Day went well, the next steps are finalization of the contract and everything else. There is a lot to look over with a franchise agreement. We often recommend you review this with a Franchise Attorney. While we always recommend it, it is not required, and not everyone does it. Your decision will depend on how much you trust your own judgement regarding contracts.
12. Onboarding. Congratulations! You did it! -- Once you have signed the Franchise Agreement, and paid your Franchise Fee, the onboarding process with the franchisor starts. This varies by franchisor – but always includes a lot of information, training, and usually some travel. This is where the real excitement of entrepreneurship takes hold.
At The Franchising Company, we absolutely love introducing people to entrepreneurship, and in our experience, there is nothing better than franchising to help you get started on your journey of business ownership. In business for yourself but not by yourself.
When you think you’re ready to prepare to buy a franchise, we hope you’ll include us!
In the meantime, here are some great franchises to explore!
