How to Buy a Franchise

Many independent franchises will have their own instructions for how to buy a franchise from their larger corporate group. When you are considering buying a franchise, start by comparing the relative costs and benefits of doing so. Then choose your franchise wisely. Once you have selected the franchise you believe meets your desires, approach the franchise itself for more information on pursuing the opportunity. You will need to have your funding lined up before most franchises will accept your application.

Consider Costs and Benefits

Purchasing a franchise may have more up-front costs than starting a business from scratch. You will be required to pay the franchise fee, often in the several hundreds of thousands of dollars, and you will further be required to meet corporate standards for your business. These may include purchasing marketing materials and designing your physical space to the specifications of the franchise. Even though these costs are high, there are some benefits that often make the added cost worthwhile. Many franchises are immediately profitable, a huge benefit when compared to start-ups. Further, you will not be spending time in the research and development of your product, saving money in this area. Finally, you are purchasing a brand with national or regional marketability, a huge added benefit to you.

Research Opportunities

Once you decide owning a franchise is the right decision for you, the question becomes which franchise to purchase. Start by requesting franchisee packets from leading brands of interest to you. These packets will give you basic information, such as cost to purchase, requirements of the franchisee, day-to-day flexibility or rigidity of the operation and average earnings for franchises in your area. Prioritize the items as you see fit. For example, you may be looking for a franchise with a strong national presence and rigidity in structure. Alternatively, you may want to buy a franchise with only a loose relationship with its national brand.

Gather Funding

Most franchise sellers will consider your financial resources as a foremost priority in deciding whether to award you the business. As a result, it is critical to line up your funding prior to applying. Secure your personal capital, which may include investor funds, to be supplied for the project. You may not be able to secure a business loan until you have secured the franchise, but you will still want to speak with a lender to understand the likelihood that you will be approved.

Apply for a Franchise

Finally, it is time to contact the franchise owner and prepare to apply. You will likely have to supply information about your experience, financial wherewithal and, most importantly to some, why you are choosing this particular franchise as your business. You will be lead through interviews to determine if you are the type of owner the corporation would like to award a franchise to. Treat each interview like a job interview: put your best foot forward and always pay attention to detail. Come prepared with supplemental information when required, such as proof of funds or a business plan.