10 Things to know....

10 Things to Know before buying a Franchise 

With many people living out their dreams running franchises, there's gotta be something right with the whole concept.? 

Literally hundreds of thousands of franchise operations exist, offering some people a chance to become millionaires buying and running them. Many are willing to pay significant sums to get into a franchise — I'm told it costs about a half-million dollars to open a McDonald's, which by some measures is the most successful franchise operation in history. 

All that aside, buying a franchise is not an easy ticket to business success. For every success, there are many more failures, and the business landscape is littered with franchise fiasco's due to conflicts between franchisees and franchisors. 

You have to practice the same due diligence as a franchise purchaser that you would with any major investment. In fact, in some ways you have to ask even more questions than you would if you were simply opening a business — because you have to understand issues involving the franchisor, as well as the usual risks involved in opening a business. 

Here are 10 key questions I would ask before getting involved in a franchise operation. 

1. What's my upfront cost going to be? This is the most obvious initial financial question. But immediate out-of-pocket costs are only one consideration in franchising. 

2. What other fees should I plan on? You may be required to lease property or equipment from the franchisor. You may also have to pay the franchisor a percentage of your annual sales. Those numbers must be calculated into your own equations when you're trying to figure out if a franchise deal makes sense. 

3. How is the franchisor making money? Franchisors may make money by owning their own establishments, by providing services to franchisors, by simply collecting initial franchise fees from people like you or by some other combination. It's tough to make a blanket statement about whether one model is better than another, but surely you want to know where the franchisor's own interests lie. 

4. What restrictions do I have on suppliers? Are you going to be required to purchase certain goods or services from particular vendors and/or from the franchisor? If certain purchases are required, are they going to cost you more than you would otherwise have to pay if there were no restriction on where you could buy them? 

5. What kind of regional protection am I getting? Do you have any guarantees that the franchisor isn't going to sell other franchises or open up its own outlets in your geographic area? If so, how long are those guarantees good for? 

6. What kind of empire-building opportunities do I have? The flip side of the previous question: Do you get first options on new franchises in or near the same area as your first franchise? Some of the most successful franchisees are those who own multiple outlets in the same area and are able to develop their own economies of scale. 

7. How many franchisees fail in a year? You'd want to find out how many (or what percentage of) franchisees close their doors within the first year or two years, and how many or what percentage of all franchisees close annually. 

8. How many franchisees sell out in a year? A franchisee that gets out of the business by selling to someone else isn't necessarily included in the statistics of "failures." Indeed, he or she may be selling a successful venture. But you still need some idea of the turnover rate of franchisees. 

9. What's the value of a re-sold franchise? Another way of looking at the prospects for franchisees is to look at what happens to those who sell their establishments. What did they get for the re-sold franchise relative to what they put into it? Was it a profitable investment, or were they simply looking to get out and cut their losses? 

10. How do I get out of this deal, if necessary? Put another way, would you be allowed to sell your 
franchise? Can you sell to anyone, or do you have to deal with the franchisor? Would the company charge you something to sell your franchise or otherwise restrict your ability to pull out of the business? Hopefully, you'll never find out what ultimately happens regarding that last question. But, as always, you need to be prepared for a worst-case scenario.

For more information on Franchising visit us at: DiverseFranchiseSystems.com

10 Steps to Success

10 Steps - The Process to Success

Step 1 - Contact Us
Take the first step towards owning your own business fill in the Request Info in our website. Your confidential contact information will be reviewed by our staff to understand your current level of interest and to provide you the best opportunities available, that match your preferences and objectives.

Step 2 - First Appointment
One of our consultants will contact you to setup an appointment to discuss your background and goals in finding the right franchise for you. This may take about an hour and can be done over the telephone. Understanding your particular goals and needs will allow us to find the best opportunity for you. We will also need for you to fill in a pre-qualification questionnaire that will help us get more information on your background, employment history and financial situation.We will set a follow up an appointment to present you with opportunities that fit your requirements.

Step 3 – Research
Based on the information that you provide us including your experience, stated goals and needs we will research available franchises and match their models and requirements with your goals and preferences. With over 1500 franchises available in the U.S. today, our goal is to identify for you with 3-4 franchises that match your requirements so that you can then find “the” right franchise for you.

Step 4 – Presentation
We present you with the opportunities that we have identified during our research. If any of the opportunities are of interest to you, then we will arrange an introduction directly to the representative of the franchise.

However, you will need to complete and submit a confidential questionnaire, which will be supplied to the Franchisor or Franchisors of interest. Franchisors want to know that: you are financially qualified to purchase their franchise your timeframe to buy is within reasonable limits your partners or family are in complete agreement with you buying a business

This does not obligate you in any way. It simply shows the Franchisor that when you find the right opportunity then you are capable of acting on it and buying it. During step 4 (Presentation) we will also try to clarify your goals and needs as identified in Step 2, and if necessary repeat Steps 3 & 4 multiple times. This is a self-correcting process and it may send us several times throughout steps 2-4 of the process. Please keep in mind that the Franchise Consultant is presenting you opportunities, but you must make the decision that is best for you and your family. Therefore, refining the criteria for the best opportunity for you is an ongoing process.

Step 5 - Introduction to Franchisor
For each of the opportunities that you have an interest, we will facilitate an introduction to the Franchisor. The Franchisor will send materials to help you become acquainted with their franchise opportunity. They will present to you their particular process and send you the Franchise Disclousure Document (FDD), which is a disclosure document for their franchise opportunity. The FDD will have a receipt, sign it and return to the Franchisor immediately.

Step 6 - Review of the FDD
We will discuss the items that are contained in an FDD; specially those items that you should pay close attention. You should then review the FDD in complete detail, writing down any questions or concerns for discussion with the Franchisor. The FDD will contain a list of franchisees and contact information.

Step 7 - Call Franchisees
The Franchisor should provide you a list of several franchisees for you to call to ask questions about the franchise opportunity. Obviously, the Franchisor is going to give you a list of franchisees that are successful and have positive things to say about the franchise. You should contact these references and ask them why and how they became successful. Then you need to determine if you can do the same things that they did to be successful.

Step 8 - Consultation with Attorney and Accountant
You should always consult with an attorney and an accountant before making a decision. It is important to insure that both people have a good background in franchising. If they do not, then the process may be more costly and time consuming while they do their research.

Step 9 - Attend a Discovery Day
Most franchisors have a Discovery Day, where they will invite you to their location. You will not only get crucial information for your decision, but will get to meet the staff that will be providing your initial training and continuing support.

Step 10 - Decision Time
You have taken all of the steps up to your Decision time. Congratulations if you have decided to buy a franchise. You have become a “Frantrepreneur”, a cross between a traditional entrepreneur and a modern franchise owner, a person that possesses the desire to be a business owner, without having to reinvent the wheel. Now, you will be able to own your business while minimizing risk by buying a proven business opportunity. We wish you well in your new endeavors.

Email us directly for more details: DiverseFranchise@gmail.com