As you start the process of looking into franchise and business ownership, you might become overwhelmed by all the questions you have. While the journey ahead seems long, working with a broker can make the process a whole lot easier. Brokers, or franchise consultants can address your concerns and help you evaluate businesses to own. Matt Bogart, former FranChoice Consultant, who works at Franchise.com is here to answer some of the most commonly asked questions by franchise candidates.
Q. Why should I choose to use a franchise broker? And, how does it make my life easier than researching businesses on my own?
A. Much like a real estate broker works with future home owners, where you to explain 'what your looking for in a house', a franchise broker does the exact same thing for a franchisee. The process can save people time and effort. In addition, a broker can prevent you from looking at businesses which are not a good match. For example consultants can match a persons' skill sets, interests, and most commonly, finances. Franchise brokers also provide guidance in the process of due diligence. When you are getting serious about business ownership, it is similar to how a real estate broker provides guidance in the home buying process.
Q. How do franchise consultants qualify buyers to ensure they meet the franchisors needs?
A. Consultants spend much of their time at the beginning of the process researching before making any recommendations to a candidate. They want to understand the future franchisees' needs and uncover perfectly matched businesses for them. It entails understanding the skill sets of a candidate and their financial capabilities and long term goals. This only is fully vetted out after considerable and substantive conversations. You'll discover many questions that most people would never consider before initiating dialogue with a franchise company directly.
Q. How can candidates learn how much they can make with each franchise opportunity ie the profit margins to be made?
A. Naturally understanding the financial performance of an opportunity should be a major consideration of any investment. Business ownership is not for everyone, and it takes time for a business to develop revenue and profitability. Some franchise companies do provide documentation around this topic in their disclosure documents called FDDs. Item 19 in the FDD (Franchise Disclosure Document) outlines earnings but they are written any number of ways. Regardless of what an FDD states, candidates must use their conversations with existing franchises to fully understand the financial opportunities. And, to assess how reasonable the expected time frames to achieve their financial goals are.
Q. What are some of the hidden costs associated with going into business?
A. The biggest 'hidden cost' of going into business is personal sustainability. All fees associated with your agreement with a franchisor must be disclosed to a candidate. So, there should really be no surprises. Some franchisors even include a number for 'working capital' in their estimates of cost for starting their business. Those are listed as items 5, 6, and 7 in the FDD. What candidates need to understand is the time frame they will need to cover their basic living expenses until the business reaches break-even and then profitability.
Q. How long does the process usually take to become a franchisee?
A. In general, it should take someone anywhere from 30 – 45 hours of due diligence to complete an investigation of any company. How long that takes is up to the candidates motivation and interest level. I’ve worked with people who’ve completed that process in 3- 4 weeks, and others who’ve take months. If all the proper components are in place, the typical time frame is 45 – 60 days.
We hope this provides useful information when beginning your search for a business to own. If you would like to speak with Matt please call him at 877-808-5325 or click on the link below to begin your search: