Five Tips for Buying the Right Franchise Business

Written by Eric Bank

In today's economy, in which everyone is talking about the need to stimulate growth, there has been quite a boom in entrepreneurship. There are a number of ways to become an entrepreneur, but buying the proper franchise remains one of the surest routes to success. This is due to the training and resources that accompany the franchise of an established company/brand. There are hundreds of franchises available, so how will you know which one is right for you? Here are five tips to help you choose the right franchise business for you.

1.      Evaluate Yourself

It is important to evaluate your motives for wanting to own a franchise. Ask yourself: what are your financial and career goals? What kind of hours do you want to work? Are you ready to take on the risk of a owning a franchise? Another thing to consider is your personality. While experience in the industry is important, it can be argued that having an entrepreneurial spirit and work ethic is more important. Entrepreneurs tend to follow their gut and take risks that others wouldn't. If this does not describe you, you might want to rethink your plans.

2.      Financing

This is an obvious one. When thinking of buying a business, one of the first things to consider is your finances. Chances are that you don't have millions of dollars in cash just sitting around. However, you can take out a business loan, as long as you have a good credit rating and history. Negotiate with your banker and find out how much money can borrow. This will help to sift through the franchise opportunities that are within your budget. You can also decide to wait a bit until you have enough money to buy the franchise that you want.

3.      Find a Business That Is Recession Resistant

Even though we are pretty much out of the recession, many people are still feeling the effects of it. To businesses, a recession means that consumers are reluctant to spend money, and when they do spend, they are very particular about what they buy. Businesses that sell high-end clothing and vacation homes tend to suffer during such times while businesses such fast food joints, hair salons and senior care facilities continue to do well.

4.      Review and Understand the FDD

The FDD is the franchise disclosure document. It outlines information about the franchisor, current franchisees' activities and your obligations as a franchisee. Understand every word of this document to get a clear picture of the pros and cons.

5.       Ask the Franchisor all Necessary Questions After performing your due diligence and reviewing the FDD, ask the franchisor all the necessary questions about areas not covered in the FDD, such as what is the sales training, where is the closest location of another store within this franchise, and how much promotional support the franchise will receive. Also ask whether they will work in your marketplace.

Making the decision to buy a franchise business is not simple. Finding the right one to match your passion and goals is even more difficult. Following these five tips will help make the process less complicated and get you on the road to success with your new franchise business. And don't forget, for all your accounting and tax work, you can turn to Small Business Financials for the support you need.