Question: I seem to spend quite a bit of time looking at a franchise only to discover that there is something about it that is a huge deal killing point or something that I just don't feel comfortable with. What are some quick tests I can apply to identify a good franchise opportunity without wasting too much time?
Answer: I'm assuming that you have spent some time setting goals for the characteristics you want in a franchise business. This is the most important first step since you won't have any way to know when you've arrived if you don't know where you're going. From these goals you can quickly determine if any franchise you look at is worth the time to complete a thorough investigation.
Once you have determined your goals, there are a few other key tests that you can quickly use to make sure you're looking at a franchise that might be a good match for you. These key factors assume you have received a UFOC from the franchise and include:
Investment Requirements. Examine the amount of net worth and liquidity that is required by the franchise. There's no sense spending lots of time investigating a franchise that you can't afford.
Territory Limitations. Ask the franchisor if there are viable territory options available within the area that you are interested in locating a business. If not, move on.
Litigation. Item 3 in the UFOC requires the franchisor to disclose all relevant litigation history. Reviewing and questioning the information in this section can allow you to quickly form an opinion about the relationship values of the franchisor.
Failure Rates. Item 20 in the UFOC requires the franchisor to disclose all relevant data concerning unit failures or transfers during the most recent three years. If the track record doesn't look strong enough to you, there is no reason to proceed.
Required Skill Sets. If you get past the factors listed above, ask the franchisor to give you a list of the characteristics and skills they consider essential for a franchisee to be successful in their system. If these don't match your skills or if they are inconsistent with your goals for a business, head for the door.
If you get past these items and you still like what you see, the next step is not quick but it is very important. Get on the phone and call a number of the existing franchisees. Spend the time it takes to get a sense of the system from their perspective. As trite as it sounds, if you find an overwhelming consistency in their input, it is a great indicator of how you would end up feeling if you become a franchisee in this system.
If you get mixed input from these calls, try to determine which franchisees you are most like. Which ones do you identify with? The feelings of the group that are most like you will give you the clue you need to determine how you will feel when and if you become a franchisee.
