Buying a franchise can be nerve-wracking, but knowing what to expect makes all the difference
Starting as a server at age 15 in Edgewood, TX and working in different roles at Buffalo Wild Wings, Red Lobster and Melting Pot during and after attending college at Oklahoma Baptist University, Cassidi Brown always had an affinity for the restaurant industry and knew that is where her future lied. However, even with all her institutional knowledge, she came to find that the franchise buying process was more complex than she expected.
“While it is not something I wish I knew, something I learned is that it is a very complex decision. The business is not a ‘sign on the line and now you have your store’ type thing.”
Brown, an up-and-coming Coolgreens franchisee, didn’t let the complexity of the process discourage her. Instead, she relied on readily available resources and good old-fashioned hard work to ensure that she was taking the right steps when making one of the biggest decisions of her and her family’s life.?
1. Make the FDD your #1 bestseller read
Brown cannot stress enough how important is to know the Franchise Development Document (FDD) inside and out. Under the Federal Trade Commission’s (FTC) Franchise Rule, franchisors are required to give you an FDD at least 14 days before you are asked to sign any contract or pay any money to the franchisor or an affiliate of the franchisor so you can properly evaluate a franchise opportunity. 1851franchise.com offers resources to help you understand the FDD and what to look for when evaluating a potential franchise partner:
2. Line up financing early
Mike Ward, a Philly Pretzel Factory franchise owner, recommends having your financing sources determined and established upfront.
“The last thing you want to do is get the funding as you go. In addition, if the franchise says you should budget a certain amount for something, I would double it. Be prepared for the unexpected.”
While financing options are plentiful, make sure you choose based on what’s right for you, what you are able to borrow and what level of risk you can comfortably expose yourself to. If you are in a position to tap your network for financing help, that is a good place to start. If that is not an option, look into financing opportunities through your potential franchising partner, bank loans, SBA loans, and home-equity lines of credit.
“Be careful when utilizing (home-equity line of credit) type of financing, however. The home-equity line of credit and a second mortgage are secured by your home. If you can't repay the amount you finance using this source, you risk losing your home,” according to Entrepreneur.
3. Lean on your franchisor for feedback and advice in the buying process
When looking to go into franchising, you are essentially looking for a business partner. Just with any partnership, you’ll always want to make sure it is a cultural fit between you and the franchisor brand and its leadership team. Once you determine it is, don’t hesitate to lean on the franchisor for answers to your questions. If it is a good fit, they won’t hesitate to provide you with answers in a timely manner. If you’re not getting straight answers to your questions, that may be a potential red flag to consider in your evaluation.