What to Discuss With Your Franchise Consultant Before Buying a Business
Franchising is a great path to business ownership. But deciding the type of industry you want to invest in as well as the brand, can be a daunting task. There are nearly 800,000 franchises in the United States, and choosing the one that’s right for you is a big decision. That’s why entrepreneurs enlist the help of a franchise consultant.
A franchise consultant helps prospective franchisees and franchisors navigate buying and selling. Consultants can be well worth it, especially for first-time entrepreneurs needing direction. It’s a big job, and they have become a very big part of the franchise industry. Understandably so with a selection of nearly 4,000 types of franchises in the marketplace. That’s why franchisees will seek advice. Consultants, by definition, are in business to do just that. They guide potential franchisees through the investment process, serving as an advisor and counselor, educating the potential franchisee about the latest trends and best practices.
The term consultant is often interchangeable with the term franchise broker. These are experts who greatly aid franchisors and potential franchisees. On one side of the equation, they help franchises grow by connecting a brand with entrepreneurs who have been vetted and appear to be a good fit. Conversely, a franchise broker has access to a wide range of industries with the ability to connect buyers and sellers — de-stressing the process. Typically, brokers are licensed realtors and can “broker” the transaction and earn a commission for the match-making services they conduct.
Questions About Franchising
Business brokers spend time with clients, asking many questions and digging deep. Whether you engage the assistance of a broker or you go through the discovery process yourself, first, there are some questions you need to answer before you step into the franchising arena. For example:
- Do you enjoy following a system? There are many advantages to franchising but you do follow the operating system of the franchisor. If you are seeking more freedom, franchising may not be the way to go.
- Do you have family support? Are you ready to be an owner? This is a big step if you are making a career change. Will you be involved in day-to-day operations, or are you more comfortable doing this part-time as just a side hustle, or as an investor?
- Are you financially prepared to own a business? Will you be able to support yourself and your family until business begins turning a profit?
- What are your interests? What industries do you think would be a good fit for you? Are you passionate about purchasing a specific brand? Remember, becoming a business owner is very rewarding when you are doing something you enjoy.
Questions to Ask a Franchisor
Your franchise consultant will want to know the answers to these and more questions as they get to know you. On the flip side, brokers/consultants are there to answer those big franchise questions you have. Keep in mind, franchising is a great opportunity to have a quicker ramp-up in business, with the opportunity to lower your risk by using a proven business model. The franchisor provides training, ongoing support, and advertising assistance to increase your chance of success. But you’ve got to know that brand and that business inside out, so having a comprehensive understanding of the franchise is essential. Questions are important. That’s why the International Franchise Association (IFA) has provided a guide outlining the many questions to ask a franchisor.
You or your consultant should review the FDD, or Franchise Disclosure Document, from the brands you are interested in. That may spark many questions for you. There are some general concepts you need to know before you sign your franchise agreement. Franchising is a business investment, so the top questions to ask a franchisor are about finances:
- Are the terms or franchise fees negotiable?
- How has the brand been growing? How are top-performing locations making that happen? What are the long-term plans?
- How many franchise owners have failed and why?
- Do you help with financing? What are the costs? How much money can I make?
- How much are royalties, and how are they collected?
- What do I pay before I make a profit?
- What are the net worth and liquid capital requirements?
- Do I get a protected territory to safeguard my investment?
- How much money does the franchisor make from the franchisees?
- Are there any additional costs coming from my bottom line?
You want to understand the overall success rate of the franchise and how you will be supported by your franchisor. Ask questions about the marketing plan, training, and the support you will receive. Keep in mind while you have the opportunity to ask your consultant questions, as well as your prospective franchisor, one of the most valuable resources for you is asking current franchisees about their experience. They, too, are experts in the field and can provide great insight into the day-to-day operations of the franchise.
Allegra Provides Guidance
At Allegra, we have franchise and industry experts available to you to address all your questions about franchising. Our job is to make you comfortable with your investment and do all we can to assist with your success. We want to establish a great partnership from the very beginning of our relationship.
As an Allegra Franchise Member, you will be providing small and medium-sized businesses and organizations with marketing communications support like printing, direct mail, signage, displays, design, eCommerce sites, website design, email marketing, and more.
Allegra has been in business for more than 45 years, enjoying growth and success with more than 200 locations. If you are interested in becoming an Allegra Owner, request information, and let’s start answering your questions.