The Beginner's Guide to Acquiring a Franchise Brand

Franchising provides aspiring business owners a promising path to success with a proven system and the support of a corporate team. However, not all brands have equal potential; with over 3,000 franchise concepts available in the U.S. alone, the choices can seem overwhelming. 

1851 Franchise spoke with Colette Bell, co-founder and vice president of franchise development for Ace Handyman Services to help break it down. The following steps will walk you through the process of choosing and acquiring the right franchise brand to help you fulfill your entrepreneurial aspirations.

Determining the Industry

The first step in acquiring a franchise brand is to narrow down your choices by selecting an industry. With various sectors experiencing growth and success, it's crucial to align your interests with market opportunities. While it’s important to take personal interests into account (because it’s often more enjoyable to promote a product or service you love), you should also prioritize an industry that offers you the financial stability and lifestyle that you desire. 

Assessing Financial Feasibility

Once you've identified an industry, it's essential to evaluate your financial capacity. You need to gain an understanding of what you can afford in terms of the initial investment and ongoing expenses. Conduct thorough research to estimate your potential return on investment (ROI) and create a budget for the first few years of business ownership.

Looking at a franchise’s Franchise Disclosure Document (FDD) can give you some great information about costs and potential earnings. However, you need to consider your finances more holistically. 

“Any business, even if it's a franchise with a great concept that's been around for a long time, starts at zero and it has to grow from there,” Bell said. “So I recommend that franchise candidates, regardless of what they're getting into, not only spend time looking at the Item 7 on the FDD, which includes startup costs for any franchise concept, but they build a full one-year budget with the expectation that they will not make any money for at least the first year. Then they should ask themselves, ‘Do I personally have enough savings or is my spouse making enough money that our living expenses can be covered outside of this brand new business for the first year?’”

If that question is difficult to answer, seek professional advice as there are a myriad of financing options available to eligible entrepreneurs.

Exploring Franchise Opportunities

With a clear understanding of your financial parameters and industry preferences, you can begin to explore franchise opportunities. Start by researching brands that align with your passions and values. Evaluate factors such as leadership vision, differentiation, marketing strategies and scalability potential. A great place to start is with the brand’s history and existing success.

“Do some research into how long the franchise model has been around,” said Bell. “And not just length of time, but look at different diverse markets because we know that franchises start as businesses that are very successful in one place and then they franchise. That doesn't always mean it will be as successful in different demographic markets.”

Once you determine the probability of success of a given concept within a particular market, you also want to understand who the franchisor is, because that relationship will be very important.

“Spend some time investigating who you are getting into business with,” said Bell. “Who are the people behind the franchise and what is their experience with the industry? How long have they been with the company and been a part of the business?”

The corporate team is your main source of support, so you want to be sure they are people you feel comfortable relying on.

Once you have narrowed your options down to a handful of brands, engage with existing franchisees with each brand to gain insights into their experiences if possible.

Taking the Next Steps

Once you've identified a franchise brand that resonates with your goals, it's time to take some concrete steps towards acquiring a franchise. If you don’t feel quite ready to directly contact the franchisor, or if you want some additional guidance before selecting a brand, there are many professionals out there who specialize in helping entrepreneurs find their match.

“There's lots of excellent professionals out there that are in the franchise matchmaking world and they have a lot of information that they can share with people about different concepts,” Bell said.

However, to truly start the process, you’ll need to initiate contact with the franchisor and complete any further due diligence to ensure you’re comfortable before committing to the brand. Read all legal documents carefully, paying special attention to the FDD (which details past financial performance and expected expenses for franchisees) and the franchise agreement (which outlines your obligations as well as those of the franchisor). Be sure to enlist an expert, such as a franchise lawyer, to help you navigate the legal paperwork.

Starting Your Journey as a Franchisee 

Success in franchising hinges on choosing a brand (and an industry) that reflects your interests and suits your lifestyle. Research that brand thoroughly and don't be afraid to enlist the services of franchise attorneys, brokers, coaches or consultants along the way. Acquiring a franchise can be complex, but if you can navigate the complexities, franchising is a great way to achieve your business ownership goals.

To learn more about franchising basics, check out these related articles on 1851 Franchise:

• Franchising Basics: What Is a Franchise Agreement?
• What Is a Franchise Discovery Day and How Should I Prepare?
• What Is a Franchise Lawyer and Why Would I Need One?