When learning how to buy a franchise, make sure to prepare for the interview process.
You may assume when starting a franchise you’ll be done with the dreaded traditional interview process you’ve endured when starting a new job in the past. However, although the evaluation process differs by franchise system, most include an interview, so don’t let those interview skills get rusty quite yet. The initial franchise interview is typically a phone call with the franchisor or a member of their development team; think of it as a two-way street. While the franchisor will be qualifying you and your ability to run a location in their network, it also gives you a chance to determine if the business is a good fit for you. As with any interview, preparation is crucial. Not only will you need to explain your background and business goals, but you will also need to listen carefully and ask a few questions of your own before making a decision on the investment. Read on for what you should know about this important step in buying a franchise.
Be Aware of Potential Challenges
Do your homework. Be sure to thoroughly research the industry you’re interested in and have a good understanding of challenges that could lie ahead. A potential franchisor will also want insight into how you would deal with difficult situations, whether it’s an internal staffing issue or industry shift that could affect the franchise network as a whole.
Most established franchisors have contingency plans for large shifts in business but are interested in your take on how you would pivot your own strategy if you bought a franchise. They won’t fault you for not knowing specifics, but you should exhibit the ability to adapt. Franchisors are looking for candidates with a good understanding of the business and the industry to ensure their brand will be in good hands.
Analyze Your Financial Situation
A variety of financing options exist to help qualified candidates cover the costs of establishing and opening a new franchise location, but prospective franchisees must still meet certain minimum financial requirements. Before starting a franchise, you must analyze the required fees and other capital needed to determine if you can afford the investment. Be honest with yourself and the franchisor. Keep in mind that you’ll need more than the bare minimum to cover expenses. Unexpected costs are likely to arise, so it’s wise to have enough money to cover 3-6 months worth of expenses. Not only does starting a new business and not knowing if you’ll be able to fund it lead to tremendous stress, it could jeopardize the success of the business.
Talk to Current Franchisees
If you’re wondering how to buy a franchise, speak to current and former franchisees. Talking to those with first-hand experience is a great way to find out how a franchise really works. They can give you tips and tricks for getting into the business as well as the inside scoop on the facets of a franchise that you won’t be able to find out on paper. Day-to-day business, company culture, and overall satisfaction are important intangibles of any business. Former franchisees that have signed a non-disclosure agreement may not be able to give you many details, but those who are able to share their experience can give you an overall perspective of how the business runs and can be a valuable influence on your final decision.
Questions for the Franchisor
The interview process is a great opportunity to determine if the franchise organization will enable you to reach your goals as a business owner. The first question you should ask is about earning potential. Although you should already have an overall idea of startup expenses, find out what other fees down the line you may be liable for as your business takes off. Unfortunately, the franchisor will not be able to guarantee profit. There are no guarantees in business—period—but they should be able to provide a general success rate for their current franchisees and your growth potential for the future.
Before you start a franchise, get an idea of how much help the franchisor will provide once you open your doors. Find out if the franchisor offers setup or long-term training, any upfront or emergency financial assistance, and just how hands-on they are with their franchisees. It’s important to know what your business relationship with the franchisor will entail, what guidelines you will be required to follow and how much flexibility is allowed.
Seek out the corporate values of the franchise to get some insight on the company culture. Ask questions to learn how disputes are settled and what kind of protection they offer if you run into any legal issues in your business. How a franchise values their franchisees and treats their customers can be very revealing and help determine if you can wholeheartedly commit to the business.
A Mutually Beneficial Relationship
When starting a franchise, make sure your goals and expectations match what the franchisor can offer you. If either side has to make big changes to accommodate the other, you’re starting out at a disadvantage. To ensure your greatest chance of success, use the franchise interview process to gather as much information as possible to determine if the opportunity is truly the right fit for you before committing.
