Trust The Process (The Franchise Research Process)
Everything that is complex, is just several simple things put together. It is the job of the teacher to stack the right blocks on each other in a way that anyone can understand.
Researching a franchise is a learning process that often takes people from knowing nothing about a specific franchise (or maybe business in general), to knowing enough to be able to make an informed decision about a life changing investment.
That means there needs to be a learning process in place to take you from where you are now to where you need to be. What is frustrating about this process, is that franchise candidates want the information that comes in the middle or the end of the process but they are only at the start.
Below, I will outline the franchise research process and explain why you need one step before the other. I will also mention when a step can be moved around to fit your personal preference.
One thing to note in this, a franchisor can only tell you the financial data in their FDD which is usually revenue broken down by quartile. If you want profit margin, first year revenue, P&L level data then you have to speak to franchisees.
Assessment, Matching, and Territory Checks
Many who are interested in franchising just want to know “what franchises can make me money?” This isn’t helpful because I don’t know what you’re good at, how much you want to invest, what experience you have, how much time you have, and a whole litany of other important information that is needed to find a franchise that you can make money with.
The jockey is more important than the horse in this race and if you aren’t a good fit for a franchise, it doesn’t matter how much someone else has made because you are going to fail.
Understanding the Business
The matching process is an art and a science so when franchises are recommended, there is a chance it isn’t a good fit. You need to speak to do some online research and speak to the franchise development representative (their sales person) and they need to speak with you to make sure you are a good fit for the business.
This prevents you from reading FDDs (250+ page documents), spending hours speaking to franchisees, and doing hours of mystery shopping if the franchisor doesn’t think you are a good fit.
Loan Pre-Approval
This is a free call with a funding specialist that can give you a pretty good idea if you can get a loan for the franchise you are interested in. It’s like being pre-approved for a loan before you go home shopping.
This is only necessary if you are going to go with a loan for the business.
Read the FDD and start Financial Projections
Now things are getting serious. You need to start understanding the contractual obligations you and the franchisor have to include training and support. You will get some financial data that allows you to start building your models.
This information will help you know what you need to ask franchise owners and will bring clarity to the business model and the benefits of this specific franchise.
Speak to franchisees (called validation)
You now have a good idea of the franchise and know what knowledge gaps need to be filled. This is usually more granular numbers to complete your financial data, information about training and support, learning about the relationship with the franchisor, learn about scalability, what makes a good territory, and a lot more.
This may seem like a while down the pipeline but you can start validation within a few weeks of meeting a franchisor if you work through the process promptly.
Extensive Outside Research
Now that you understand the business, differentiators, KPIs, and more you can go all in on outside research. Mystery shop competitors, go to nearby franchise locations, drive your territory, buy demographic data for your area, ask AI for deep research, go crazy.
You will do some online research before this point, but now you know what to look for and what questions to ask. You also don’t want to spend the time mystery shopping competitors if you don’t like the franchise.
Speak to the executive team virtually
Now that you have a solid understanding of the business and have heard the perspective of franchisees, you will want be prepared to speak with the executive team. You will be able to have meaningful conversations about the business, the ramp up period, and the support you hope to get.
This is a two way street where they are also deciding if they want you as a franchisee. Their success depends on your success so they need to be sure they have great owners join their team. Typically, the better the franchise the more picky they can be.
Professional Guidance
At this point you should be about 80-90% sure you want to own this franchise. You have done all the research you can without spending money and now it’s time to bring in the pros. Reach out to a franchise attorney to review the FDD and Franchise Agreement (contract) as well as an accountant to review financials.
There is no point spending the money on their fees until you are pretty sure you want the franchise.
Visit the HQs for a Discovery Day
Now that you have a full understanding of the business, you need to go and meet the team face to face. You are about to embark on a massive undertaking that is highly reliant on the franchise and their team. You don’t want to waste your time and money on a trip until you are sure this is the franchise for you
Now you can see why just asking “how much can I make” without all the rest of the research doesn’t make sense. This process has been developed over decades and is the best way to find a franchise that is a good fit. It starts with simple information anyone can understand and builds on itself to give the franchise candidate a deep understanding of their potential investment.
If you use my franchise research app, it will guide you through this process and give you all the questions you need to ask and all the research you need to do.
That is why I say, when embarking on the franchise research journey, trust the process.
