How to Work With a Franchise Consultant
With thousands of franchise companies in over 75 different industries, there’s a lot to choose from. Business concepts run the gamut from infant care to senior care and from dry cleaning to disaster clean up. Investments range from over a million dollars for a quick service food restaurant to $50,000 or less for a simple, home-based service franchise. Finding the business that’s just right for you can be like trying to find a needle in a haystack.
That’s why companies like FranChoice can be invaluable to those interested in buying a business. A franchise consultant can help you narrow your choices to businesses that will fit your needs as a business owner and will provide training and support to help you achieve success. But whether you use the free services at FranChoice or one of the other consultant services, your end goal is the same: you want to find the best fit in a business that will be part of your life for the next 10 or more years.
Assuming you’re working with a reputable consultant company, the process the consultant will take you though should be similar to the steps that follow. Your initial call with a consultant will allow you to judge the consultant’s expertise in franchising and ability as a consultant. At the same time, the consultant will be assessing your interest in franchise ownership and will ask you questions to determine if it is the right career option for you. After this short conversation, the consultant will make an appointment to have a longer and more in depth conversation.
During the next call, you and your franchise consultant will discuss your motivations for wanting to be your own boss. Your needs and expectations for business ownership will determine which businesses the consultant will choose to introduce you to so this subject should be covered thoroughly and in as much depth as possible. Before you have this discussion, spend some time thinking about what you hope to achieve by buying a franchise, your lifestyle goals, and the exit strategy you have in mind.
In this same conversation you will talk about what strengths and skills you’ve acquired over your career and also what you enjoy doing and what you do not. Be very honest with your consultant about your likes and dislikes. The last thing you want is to be stuck managing employees for the next 10 years if that’s something you truly dislike.
Your franchise purchase will be an investment in yourself, one that will hopefully bring you a great return. Your franchise consultant will ask you to fill out a financial qualification form to help you determine what size investment you can reasonably afford. There are a number of options for financing a franchise purchase and your consultant should be able to help you weigh the advantages/disadvantages of each and also direct you to a franchise finance specialist if you desire.
Once your consultant has determined what you are looking for from business ownership, her next task is to do research on those franchises in her inventory to see which match your criteria and also have territory available in your desired location.
Each consultant company will have agreements with a number of franchise companies. The franchise consultant company brings the franchisor qualified candidates and the franchisor pays a commission to the franchise consultant company if the candidate buys a franchise, which is why the service is free to you, the consumer.
Franchisors value the service consultants provide and find the candidates they refer to be highly motivated and well educated about the process. Franchisors who want to grow their system will often work with one or more consultant companies. The consultancy can have a referral inventory of a few or a few hundred franchise companies. Some will add any company that asks into their inventory while others are more selective.
One of the ways to evaluate a franchise consultant company is to see how they select the franchisors with whom they work. At FranChoice, our business is built on our reputation and we are extremely cautious about those franchisors we will refer. For each company we work with, we turn dozens away. Before we sign a contract, we read the franchisor’s FDD and then call a number of existing franchisees to determine such items as:
- Are the franchisees happy with their choice?
- Did the training provided seem adequate?
- Were the start-up costs quoted reasonably accurate?
- Do the franchisees feel they receive sufficient ongoing support from the franchisor?
- Is the business profitable or on track to make a profit?
Prescreening franchise companies does not guarantee that every candidate referred to one by FranChoice will be a success. It does mean, however, that we only refer businesses which offer a good potential for success.
Your Due Diligence
The next step in the consultation process is for the consultant to introduce you to a selection of businesses that meet your specific requirements. Then it will be your job to do your own research into each. The franchisor will provide an FDD (government mandated Franchise Disclosure Document) to read and probably some brochures or DVDs to view. You will have one or more conversations with someone from the franchisor’s development team and, if you are both still interested, you will be invited to a Discovery Day to learn more about the concept.
Your homework during this process is to contact a number of existing franchisees to learn everything you can about being a franchisee of this system. This is your golden ticket into the inner workings of franchise ownership. If the franchisees feel poorly supported, they will tell you. If the majority are happy, that’s a good sign that you will be too. Make time to call as many as you can so that you will have a number of opinions to evaluate.
Signing the Contract
If you’ve followed the steps laid out by your franchise consultant, you will now be at the point where you need to make a decision about each of these businesses. You should have sufficient information from both the franchisor and the franchisees so that you can determine if this business feels right and will provide you with the future income and lifestyle you desire. If not, you need to tell your consultant the fit isn’t right and move on to the next. Once you do find the right fit, you will sign the contract and be scheduled for your new franchisee training.
Finding a franchise business to own is one of the most important decisions you will ever make. Choosing the right franchise can make your business ownership dreams come true while choosing poorly can cause you endless headaches and financial distress.
If you are working with more than one consultant or if you have started the process with a franchisor but have decided to research other options, let your consultant know so that they can prevent any future conflicts of interest.
A franchise consultant is there to make your job easier and to offer solid guidance and advice where you need it. Look for a consultant that will be your advocate in the research process and guide you as you make your decision. You will need to be as serious about this process as you would about searching for a new job and also be prepared to do your own due diligence. This way you will make the best use of your consultant’s time and yours and ultimately be able to make a great, well-informed decision.
Jeff Elgin is the Founder and CEO of FranChoice, a national network of franchise consultants that provide free guidance and advice to qualified individuals in the United States searching for franchise opportunities.