10 Steps you must follow if you want to buy a franchise,

2. By Lewis Trio
I ’ve been in the franchise industry for twenty years. I’ve been the
president of my own franchise company, and I’ve owned and
operated multiple franchises grossing millions of dollars and
employing hundreds of people. I’ve put
literally hundreds of people into business
for themselves and I’ve watched many “We don’t need a lot of
become millionaires and still others fail
information, we just
miserably. And the reasons were often in
the basic investigation and understanding
need the right
of the franchise investment and not information”
spending enough time or due diligence on
what franchise they should own. People
spend more time investigating the
purchase of a riding lawnmower (about 12 hours according to
Consumer Reports) than they do on making an investment decision
that will affect them and their families for the rest of their lives.
An old college professor of mine once said “we don’t need a lot of
information, we just need the right information”
So I didn’t succumb to the rage and write an eBook and then try to sell
it for $49.99 over the internet. Like David Letterman’s top ten
countdown I’ve reduced those volumes down to ten very important
steps. Some of them are “go no go” and some of the steps I admit
have a lot of sub steps but I’ve found that if you follow my outline
(which is the same process I take my clients through) that you should
either reach the decision that you have no business investing a
franchise or like the majority of people who read this, your dream of
owning your own business can be a dream come true!
Now let’s get started!
©The Franchise Learning Channel 2009 Page 2

3. Have a family
meeting and discuss the fact that you
want to go into business for
yourself. Solicit everyone’s input and
concerns. Even the kids have a stake in
the decision. If the family isn't onboard
don't do it!
Don’t overlook the extended family. Everyone has a Uncle “know-it-
an “kn
all” who can be a real negative force when you are struggling through
the start up period.
Look at your finances. How long can you
afford to live without a paycheck? For three months? Six months?
How much can you afford to invest? The franchise company is only
required to tell you how much money will be needed to start
start-up and
operate the business for the first three months.
ness
The most commons forms of financing are home equity loans and
loans from a retirement account. Consider financing carefully. Most
g
franchise companies do not model their P&L with debt service as a
routine expense. Any financing will come out of the “bottom line”. My
advice to my clients has always been finance the expansion phase of
your business not the startup. Plus financing is much easier (and
cheaper) to obtain when you have a track record to show the bank.
Will the franchise company do some financing for you? It depends. I
know of one company in the industry who does financing in the
industry but sets up payback terms which virtually has the franchise
owner paying out all of their profits in debt service. And they say they
outlawed indentured servitude!
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4. Ask yourself "are you a team player?" Be
honest with yourself. Franchise companies all have a system. And
they want people that will follow that system. If you can't be coached
you probably shouldn't look at a franchise. Can you handle calculated
risks? You have to trust that management is making decisions in the
franchise owners’ best interests. Can you work within their system
s’ interests.
and get along with their staff?
Do you want to stick with what you know?
Or do you want to tackle a new industry or learn a new skill? Choose
the industry carefully. You want to be in a healthy and growing sector
sec
of the economy that isn't saturated with your products or services.
-You want to narrow
your search down to three or four choices. Make a
folder for each and compile a comparison chart.
Like the example below you should try and give
each company a grade. It’s OK to change the
grades as you go through the “discovery” process
with each company. It’s important not to list too
many businesses it takes time to review each franchise. Don’t make
the lawnmower mistake!
Franchise Advertising Support Training Real Estate Total
Subway 10 5 8 10 33
Instant Tax 5 5 4 3 17
Snap Fitness 5 9 9 6 29
Jazzercise 8 7 9 5 29
Table 1 This is an example. Add as many ranking columns as you would like.
- -Contact
each franchise company and ask theses question:
How Big Is The Market? Is it oversaturated? Show you the
research? Has the franchise company done their
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5. homework?
1. Who are The Competitors?
2. What make their model different? Better?
3. How will they compete with the “big names” if there are any?
4. Is The Franchise Scalable? Can you grow? Are there restrictions
on that growth?
5. What are the franchise company's growth plan
plans? Are they
growing or just selling franchises?
6. What exit strategies are available? Can you get out if you are
not happy? Not making money?
-Ask for a copy of the Franchise
Ask
Disclosure Document as it is called in the industry "the FDD". This is
in two basic parts.
Part 1 is referred to as the
"disclosure" and is similar to a
mutual fund's prospectus that you
are given before you buy the fund.
It discloses the officers, financial
history, and earnings informa
information
(if available) in all 23 required
disclosures the franchise company The Franchise Disclosure
is required to report to every Document is sometimes
referred to as the “FDD” or
potential buyer. the “Disclosure document”.
Some people still may refer
ref
Part 2 is a copy of the franchise to it as a “UFOC” which was
the predecessor document
contract.
In Part One there must be information identifying the franchisor and
information
its affiliates and describing their business experience.
Information identifying and describing the business experience of each
of the franchisor's officers, directors and management personnel
responsible for franchise services, training and other aspects of the
franchise program.
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6. Information about any previous bankruptcies in which the franchisor
and its officers, directors and management personnel have been
involved.
A description of the franchise agreement conditions under which the
franchise may be repurchased or refused renewal by the franchisor,
transferred to a third party by the franchisee, and terminated or
modified by either party.
A description of the continuing payments franchisees are required to
make after the franchise opens. Plus the following:
1. Information about any restrictions on the quality of goods and
services used in the franchise and where they may be
purchased, including restrictions requiring purchases from the
franchisor or its affiliates.
2. A description of any assistance available from the franchisor or
its affiliates in financing the purchase of the franchise.
3. Descriptions of restrictions on the goods or services franchisees
are permitted to sell.
4. A description of any restrictions on the customers with whom
franchisees may deal.
5. A description of any territorial protection that will be granted to
the franchisees.
6. A description of the training programs provided to franchisees.
7. A description of the involvement of any celebrities or public
figures in the franchise.
8. A description of any assistance in selecting a site for the
franchise that will be provided by the franchisor.
9. Statistical information about the present number of franchises,
the number of franchisees projected for the future, the number
of franchises terminated the number of franchises the franchisor
has decided not to renew and the number of franchises
repurchased in the past.
10.The financial statements of the franchisors. A description of the
extent to which franchisees must personally participate in the
operation of the franchise.
11.Statistical information about the present number of franchises,
the number of franchisees projected for the future, the number
©The Franchise Learning Channel 2009 Page 6

7. of franchises terminated the number of franchises the franchisor
has decided not to renew and the number of franchises
repurchased in the past.
12.A description of the extent to which franchisees must personally
A
participate in the operation of the franchise
-Ask them:
 How much money they make?
 How long did it take for them to reach
breakeven?
 Does the franchise company support them
them?
 Would they do it again?
 Ask them anything you want. (Remember
they had to do the same thing when they
were thinking about buying
buying-just like you)
-Discovery
Day is like a Open House where the franchise company invites
potential buyers to the corporate headquarters. It's a chance to meet
the senior executives of the company. Sometimes the franchise
company will let you look through their operating manuals or visit a
training class.
-The entire process takes
The
anywhere from 30 to 60 days, not counting any travel time. For a
days,
more in-depth review of the process download the Introduction to
depth
Franchising
booklet below.
You are making what might be the biggest decision of your life take
your time and have fun
fun!
©The Franchise Learning Channel 2009
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8. Lewis Trio. Senior Mentor and President of
the Franchise Learning Channel. Lewis
brings his twenty years of experience both
as a franchise owner and a franchise
company president. He started his career
as a regional president of Fantastic Sams
where he helped develop some 70
ped
franchises employing hundreds of people
and grossing millions of dollars annually.
He eventually sold his company and started the Franchise Learning
Channel. Providing help and support to hundreds of men and women
who wanted to start their own business. Most recently he worked with
their
the Roni Deutch Tax Centers helping them to establish their franchise
in the tax preparation industry. Lewis has experience in every phase of
franchise operations and development and is an easy guy to work wit with
a great sense of humor. He is the FLC's resident expert in Master and
Area Developer franchises.
Call me with your questions at 800
800-750-0094 or email me at
0094
ltrio@matchpointnetwork.com.
How We Help
I’m associated with the MatchPoint Franchise Consulting Network. Our
ting Network
fee is paid by the franchise company, so there is no charge to our
company,
clients for our services. In other word our services are free to you
should we decide to work together.
Matchpoint was founded in 2006 with a mission of helping companies
expand their franchise networks and improve their system profitability
©The Franchise Learning Channel 2009
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9. by reducing Franchisee recruitment costs and improving the quality of
new Franchisees coming into a system.
While there are many unique aspects of the MatchPoint Franchise
Consulting Network system, what makes MatchPoint different from all
others within the industry can be classified into three categories – the
three pillars of MatchPoint Franchise Consulting Network success:
Better Informed Quality Candidates:
Information and Education are the foundational elements of the
MatchPoint system. By pre-screening franchise candidates and
providing them with a base of information and education, all parties to
a Franchise purchase transaction end up winners.
In addition to providing potential franchise purchasers with the free
consulting services of a MatchPoint Consultant, MatchPoint is leading
the industry in providing individuals free online e-learning education.
Our modules include:
Franchising Basics (how franchising works, business structure,
are you cut out to be a franchisee?, principles of success)
How to Buy a Franchise (finding the right franchise, doing due
diligence, evaluating unit economics)
Franchise Marketing (attracting and keeping customers, referral
and loyalty marketing, building the brand)
Leadership and Motivation (goal setting, mentoring your team,
setting the standard, re-imagine your business and life)
Growing Your Business (positioning your business for growth,
technology and infrastructure, standards vs. growth)
©The Franchise Learning Channel 2009 Page 9

10. Franchise Assessment Profile:
Through a unique and
sophisticated profiling
system called the
MatchPoint Personal
Franchise Assessment
Test, MatchPoint
consultants can help
potential franchisees
narrow the playing field
to only those franchise
systems that offer them the best
opportunit for success.
opportunity
In 2006 the Personal Franchise Assessment Test was created by
MatchPoint. MatchPoint developed the MatchPoint Personal Franchise
Assessment Test after thousands of hours of dedicated research in the
dedicated
Franchise field since 2004. This unique and sophisticated profiling
system helps individuals narrow the playing field to only those
Franchise systems that offer you the best opportunity for success.
Professional Franchise Consult
Consultants:
MatchPoint is committed to setting the standard for Franchise
Consultant expertise, professionalism and service. The Personal
Franchise Assessment Test provides MatchPoint Consultants with
unique insights into the skills, experience and personality of each
individual. This insight and knowledge helps the MatchPoint Consultant
identify the opportunities that best match an individual’s needs.
MatchPoint operates the largest physical office of Franchise
Consultants in the industry, where Franchise Consultants receive
Consultants
regular briefings from leading Franchisors around the world. Well
informed Franchise Consultants are uniquely positioned to offer the
best advice and value to individual franchise buyers.
©The Franchise Learning Channel 2009
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11. Take the FREE franchise test to find out what franchised businesses
best align themselves to your skills and interests. Paste the link below
or simply type into your browser http://freefranchisetest.com add
your contact information and the voucher number 63424-02.
©The Franchise Learning Channel 2009 Page 11