Sep 18, 2009

Before You Buy that Franchise

An email to a friend of mine who's considering buying a franchise.


Based upon some brief research, the company's niche seems to have a sweet spot, and may be worth pursuing.

A few things though -

I would check out the location and setup a time to meet with, or at least call a few owners.

I've found that talking with an actual franchise owner gives me real insights into whether or not the opportunity is something they would want to repeat. Many times, they have regrets (Quiznos and Subway franchisees usually hate the company and want out).

If you fill out the application they sent, they should provide you with the UFOC and franchise agreements if you qualify. Those are the legal documents that spell out all the rules, and in some cases show actual sales revenue of various locations, and what the failure/dropout rate is - all critical pieces of info.

However, beware because the franchisors don't have to disclose a store that's been closed if they're able to resell it to another franchisee - they have loopholes that make the UFOC's look better than they actually are sometimes. That's why I strongly recommend going directly to the franchisees. In fact, you don't even need their permission to do this - I would call 5-6 or so, ask to talk to the owner, and then have a list of questions prepared, such as:

1) Would you do it again?

2) What do you wish you'd known before that you know now?

3) If you don't mind me asking, how much does the store produce for you gross vs. cashflow?

4) How did you finance it (savings or an SBA loan or other?)

5) What do enjoy most / least about running the company/

6) How many hours per week do you work on or in the company?

Email me if you have any questions.

Hope this helps!

1 comment:

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