The days, weeks, and months leading up to buying a franchise is an exciting time.
You’ve selected a business model you are passionate about. You have your eye on a location with demographics to support your business. You have always dreamed of being your own boss, and you just can’t wait to get started.
As Co-founder and CEO of the Romp n’ Roll franchise network, I have mentored hundreds of franchisees buying a franchise. I know many in your shoes are tempted to dive right in and figure out the details later.
Your enthusiasm is fantastic, and a necessary ingredient for success. However, be sure to take the following five steps before buying a franchise:
#1: Choose the Right Franchise
People can be drawn to a particular franchise for different reasons.
Perhaps they like the brand, or they know someone who has had success with it as a franchisee. Some may be attracted to its potential in the market. Still others may be drawn to the brand’s target demographic.
Be sure you are compatible with the franchise you are considering, regarless of what your initial attraction was. Ask yourself, “Do I possess the temperament and skill set to make a go of this?”
At Romp n’ Roll, we preach “head and heart.” We know that individuals with both business and educational strengths are best prepared to succeed with our brand.
Choose a franchise opportunity that aligns with your own personal and professional attributes and goals.
#2: Spend Time Speaking with Existing Franchisees
No one knows the ins and outs of buying and operating the business you’re interested in better than existing franchisees. These folks have literally been in your exact position. They are uniquely qualified to offer you specific advice and insight.
Why? Existing franchisees have already gone through the exact process. Their real-world experience, tips and opinions are worth its weight in gold.
Speak with as many Romp n’ Roll franchisees as possible. You will broaden your outlook by speaking with multiple franchisees with different experiences.
Also, be sure to attend your franchisor’s Discovery Day as well.
#3: Know Your Total Net Worth
Buying a franchise requires some due diligence. Preparing a personal net worth statement is one of the first steps. It is a very useful and necessary document.
In simple terms, your personal net worth is the value of your assets (everything you own) minus your liabilities (debt).
You will save time knowing this information up front. It will also help guide you to a franchise purchase you can comfortably afford.
Also, many franchisors have requirements for individual net worth and liquid assets. Get that document prepared early to move the process along and show the franchisor you are serious.
#4: Understand The Financial Disclosure Document
Franchisors are required to produce a Financial Disclosure Document (FDD). This document contains key financial details of the franchise you are interested in. Go over this document thoroughly. You might even want to have experienced franchise attorney take a look at it as well.
The FDD outlines start-up costs such as franchise fees, licenses, equipment costs, grand opening expenses and more. You will also get an idea of how profitable your franchise may become by looking at financial projections in the FDD.
The FDD also estimates on-going expenses, which are necessary to maintain your business and remain part of the franchise network.Your typical on-going costs may include royalty payments, advertising contributions, insurances and more.
#5: Prepare to Roll Up Your Sleeves
“The fruit of your own hard work is the sweetest.”
Watching the fruits of your labor pay off is one of life’s most rewarding things. Hard work and resilience are often what gets you over the finish line.
Buying a franchise puts you ahead of the game in terms of starting a business. Your franchise network provides you the benefits of a proven business model, training, support, and more. However, it’s up to you to use tools and resources like this to make your own success.
As an entrepreneur, you are in charge of your own success. I have found the most successful franchisees are those who are motivated to work hard—while being creative and adaptable.
The knowledge you’ve gained here should help you channel your exuberance in ways that will serve you best. Good luck on your journey to choosing the ideal franchise, and being fully prepared to make it a success!
Being passionate about your franchise is necessary. Learn why.
Michael Barnett is the Co-Founder and CEO of Romp n’ Roll. In addition to leading the Romp n’ Roll management team, Michael is an active member of the International Franchise Association, the National Association for the Education of Young Children, and serves on the Board of Directors for Connor’s Heroes and Juniata College Center for Entrepreneurial Leadership. He and his wife, Babz, were featured on the first season of ABC-TV’s “Shark Tank“.