Questions and Answers for First Time Franchise Buyers
What you need to know when buying your first franchise business

Today I want to answer some of the most common questions that people ask me about starting their first franchise business .

Question: What is the typical process for buying a franchise?
Answer: The first step in buying a franchise is having a phone conversation with a representative from the franchise. Believe it or not, every single person who has developed a successful career owning a network of multiple franchise businesses that spans across a region of the United States, took the initial step of speaking with the franchisor on the phone to learn more about a franchise opportunity and how it appeals to them on a personal and financial basis.

Once you have become comfortable with the franchise system, its employees, and the opportunity, you will be invited to a discovery day or to speak with other franchisees. At this juncture, you will know whether the opportunity is right for you. I always recommend visiting the franchisor and meeting the franchise's management face-to-face; face time and relationships are always important in any business venture.

Question: How much money will I make owning a franchise business?
Answer: Many factors affect how much money you will make owning a franchise business. These factors include: location, size of your initial investment, industry, the direction of the overall economy, the amount of time and effort you put into your business, and much more. I have said it numerous times: the best way to find out how much money you will make is by calling other franchise business owners that have been in the system for many years. You can find a list of current franchise business owners by looking in the Franchise Disclosure Document(FDD) or you can just search on Google, make a phone call to the business and ask to speak directly with the owner. It's important to note that many franchises are unable to tell you how much money you will make because doing so may be breaking the law in their state or country, as a result they will often give you a list of franchisees to call.

Question: What is the typical time period from when I sign the franchise agreement until I open my doors for business?
Answer: The period of time from signing the franchise agreement to opening your business varies based upon many factors. I think the major factor that delays most franchisees from opening their franchise business is choosing a location and signing a lease, note that this applies only to retail franchise businesses. Financing is also another significant factor that can delay you from opening your franchise business but if you have decent credit and/or significant assets then you will receive your financing in about two weeks. Otherwise, the schedule outlined by the franchisor and displayed within the FDD is sufficient.

Question: As a successful franchise business owner what do you think is the most beneficial part of owning a franchise business?
Answer: The most beneficial part of owning a franchise business is having the freedom of owning your own business while not being in business by yourself. By becoming a member of a franchise, you are receiving the right to use one of the most powerful brands in your industry which ensures you guaranteed customers beginning from the day you open business. Additionally, you have access to a support network of like-minded franchise business owners who are all driving at one goal: maximizing their profitability. With this support network in place, you can avoid mistakes and share information to help you maximize your business's profitability.

Question: How long will it take before my business is profitable?
Answer: Many factors affect your profitability which can make it difficult to forecast. However, to build a realistic picture of when your business will become profitable I recommend calling about 10 franchise business owners of your desired brand and calculate the average of your responses. Note that the single most important driver of your business's profitability is the time and effort you dedicate towards making it succeed. For a retail business, your location will also be a significant determinant of your profitability. Be aware that businesses which require less startup capital and whose financial outcomes are based greatly on how hard and how many hours you work, generally will become profitable very quickly because your profits are driven mostly by your work ethic.

Question: Should I take out a loan to start my franchise business ?
Answer: I believe that using debt to purchase a home, a business, commercial real estate, stocks, bonds, and other assets is generally a good policy because it will drive your return on investment higher. However, with higher returns comes greater risk; so it's important not to go overboard when considering how much debt your business should have. Also, plan for negative outcomes in your business such as: unforeseen costs, lower than projected sales, and other scenarios when determining how much debt your business will have so that you can maintain profitability during difficult times - doing so often separates the winners from the losers in business ownership.

Question: What options are available for selling my franchise business in the future?
Answer: I always recommend having an exit strategy in place from day one. Keep in mind that one of the greatest benefits of owning a franchise business is your ability to sell it in the future or to pass it on to your heirs later down the road. Additionally, owning a franchise provides an additional option that typical small business owners don't have: you may be able to sell your business to the franchisor in the future. Therefore you should never hesitate to speak openly and honestly with the franchisor about your plans for growing your business and your succession plan in the event that something unfortunate happens to you and you are unable to manage the day-to-day business. Planning for such unforeseen events can help you avoid a complete disaster should such a situation arise.

Question: How many hours per week will I work owning a franchise?,br>Answer: This varies greatly depending upon the level of investment, industry, and type of franchise you are buying in to. Generally, you will work a significant amount in the preliminary and startup phase of your business. Once policies, procedures, and general management has been ingrained in the staff and business, your daily work hours should diminish significantly and you may choose to open an additional location. I recommend speaking with individual franchise business owners and ask them how many hours per week they work and then average the results. This will give you a good idea of what you are getting yourself in to.

I wish you a successful journey towards business ownership.