How to be a Savvy Franchise Buyer & Make a Smart Franchise Investment

Google "How to Buy a Franchise" and you get something like 620,000 results.

I have sold a lot of franchises over the past 20 plus years and I have met only a few very savvy franchise-buyers.

Here's what the savvy franchise-buyers did.

    1. Look for franchises that make money. Passion is important. But, they already lead passionate lives.

    2. Know their cash availability, net worth and how much of they plan to invest and put at risk

    3. Have a $10K franchise pre-purchase research budget for attorney, CPA, travel & expenses

    4. Select 3 franchises to initially consider.

    5. Start by sending in the application to show that they qualify.

    6. Request the FDD from the franchise salespeople on that first call with them.

    7. On their initial FDD review they read the Items 7, 19 & 20.

        • Item 7 Estimated Initial Investment

        • Item 19 Financial Performance Representation - FPR (Earnings Claim)

        • Item 20 Outlets and Franchisee Information

    8. Franchises with no Item 19 FPR are rejected immediately.

    9. High turnover franchises based on Item 20 are a caution.

    10. Franchises with an attractive Item 7 and Item 19 are on the list.

    11. Request the back-up basis numbers for the Item 19 FPR from the franchisor.

    12. Ask for a Supplemental FPR for more numbers.

    13. Complete the franchise sales discovery process for all 3 franchisors.

    14. Go over the numbers with your CPA..

    15. Call existing franchisees with a 7 question structured interview based on the Item 19 FPR Key Performance Indicators - KPIs.

    16. Pay your franchise attorney to review the FDDs and franchise agreements for your top picks.

    17. Have your franchise attorney look for reasonable modifications as an addendum to the franchise agreement.

    18. Negotiate with the franchisor.

    19. Make your selection.

    20. Sign the franchise agreement and pay the fee.

These savvy franchise-buyers had a positive attitude, were polite and approached the franchise investment process as a tactical business process.

They understood this was not a casual endeavor.

This was serious and their money was going to be risked.

Great franchisors want these savvy franchise-buyers since they have talent and capital that will add value to their franchise system.

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