10 steps to finding the perfect franchise

©The Franchise Learning Channel 2009

By Lewis Trio

’ve been in the franchise industry for twenty years. I’ve been the

president of my own franchise company, and I’ve owned and

operated multiple franchises grossing millions of dollars and

employing hundreds of people. I’ve put

literally hundreds of people into business

for themselves and I’ve watched many

become millionaires and still others fail

miserably. And the reasons were often in

the basic investigation and understanding

of the franchise investment and not

spending enough time or due diligence on

what franchise they should own. People

spend more time investigating the

purchase of a riding lawnmower (about 12 hours according to

Consumer Reports) than they do on making an investment decision

that will affect them and their families for the rest of their lives.

An old college professor of mine once said “we don’t need a lot of

information, we just need the right information”

So I didn’t succumb to the rage and write an eBook and then try to sell

it for $49.99 over the internet. Like David Letterman’s top ten

countdown I’ve reduced those volumes down to ten very important

steps. Some of them are “go no go” and some of the steps I admit

have a lot of sub steps but I’ve found that if you follow my outline

(which is the same process I take my clients through) that you should

either reach the decision that you have no business investing a

franchise or like the majority of people who read this, your dream of

owning your own business can be a dream come true!

Now let’s get started!

I“We don’t need a lot of

information, we just

need the right

information”

©The Franchise Learning Channel

meeting and discuss the fact that you

want to go into business for

yourself. Solicit everyone’s input and

concerns. Even the kids have a stake in

the decision. If the family isn't onboard

don't do it!

Don’t overlook the extended family. Everyone has a

all” who can be a real negative force when you are struggling through

the start up period.

afford to live without a paycheck?

How much can you afford to invest?

required to tell you how much money will be needed to start

operate the business for the first three months.

The most commons forms of financing are home equity loans and

loans from a retirement account.

franchise companies do not model their P&L with debt service as a

routine expense. Any financing will come out of the “bottom line”. My

advice to my clients has always been finance the expansion phase of

your business not the startup.

cheaper) to obtain when you have a track record to show the bank.

Will the franchise company do some financing for you? It depends. I

know of one company in the industry who does financing in the

industry but sets up

owner paying out all of their profits in debt service. And they say they

outlawed indentured servitude!

he Franchise Learning Channel 2009

Have a family

discuss the fact that you

want to go into business for

Solicit everyone’s input and

Even the kids have a stake in

If the family isn't onboard

Don’t overlook the extended family. Everyone has an Uncle “kn


Look at your finances. How long can you

afford to live without a paycheck? For three months? Six months?

How much can you afford to invest? The franchise company is only

required to tell you how much money will be needed to start

ness for the first three months.


loans from a retirement account. Consider financing carefully. Most




your business not the startup. Plus financing is much easier (and




industry but sets up payback terms which virtually has the franchise


outlawed indentured servitude!

Uncle “know-it-


How long can you

For three months? Six months?

franchise company is only

required to tell you how much money will be needed to start-up and


g carefully. Most




Plus financing is much easier (and




payback terms which virtually has the franchise



honest with yourself.

they want people that will follow that system.

you probably shouldn't look at a franchise.

risks? You have to trust that management is making decisions in the

franchise owners’ best interes

and get along with their staff?

Or do you want to tackle a new industry or learn a new skill? Choose

the industry carefully.

of the economy that isn't saturated with your products or services.

your search down to three or four choices.

folder for each and compile a comparison chart.

Like the example below you should try and give

each company a grade. It’s OK to change the

grades as you go through the “discovery” process

with each company.

many businesses it takes time to review each franchise.

the lawnmower mistake!

Franchise Advertising

Subway 10

Instant Tax 5

Snap Fitness 5

Jazzercise 8

Table 1 This is an example. Add as many ranking columns as you would like.

each franchise company and ask theses question:

How Big Is The Market?

research? Has the franchise company done their


Ask yourself "are you a team player?"

honest with yourself. Franchise companies all have a system.

they want people that will follow that system. If you can't be

you probably shouldn't look at a franchise. Can you handle calculated


s’ best interests. Can you work within their system

and get along with their staff?

Do you want to stick with what you know?


the industry carefully. You want to be in a healthy and growing sec


-You want to narrow

your search down to three or four choices. Make a

folder for each and compile a comparison chart.

Like the example below you should try and give

each company a grade. It’s OK to change the

grades as you go through the “discovery” process

with each company. It’s important not to list too

takes time to review each franchise. Don’t

the lawnmower mistake!

Support Training Real Estate

5 8 10

5 4 3

9 9 6

7 9 5

Add as many ranking columns as you would like.


How Big Is The Market? Is it oversaturated? Show you the


Ask yourself "are you a team player?" Be

a system. And

If you can't be coached

Can you handle calculated


ts. Can you work within their system

Do you want to stick with what you know?


You want to be in a healthy and growing sector


Don’t make

Real Estate Total

33

17

29

29

Add as many ranking columns as you would like.

- -Contact


Is it oversaturated? Show you the



homework?

1. Who are The Competitors?

2. What make their model different? Better?

3. How will they compete with the “big names” if there are any?

4. Is The Franchise Scalable? Can you grow?

on that growth?

5. What are the franchise company's growth plan

growing or just selling franchises?

6. What exit strategies are available?

not happy? Not making money?

Disclosure Document

in two basic parts.

Part 1 is referred to as the

"disclosure" and is similar to a

mutual fund's prospectus that you

are given before you buy the fund.

It discloses the officers, financial

history, and earnings informa

(if available) in all 23 required

disclosures the franchise company

is required to report to every

potential buyer.

Part 2 is a copy of the franchise

contract.

In Part One there must be i

its affiliates and describing their business experience.

Information identifying and describing the business experience of each

of the franchisor's officers, directors and management personnel

responsible for franchise services, training and other aspects of the

franchise program.


Who are The Competitors?

What make their model different? Better?

How will they compete with the “big names” if there are any?

Is The Franchise Scalable? Can you grow? Are there restrictions

on that growth?

What are the franchise company's growth plans? Are they

growing or just selling franchises?

What exit strategies are available? Can you get out if you are

Not making money?

-Ask for a copy of the

Disclosure Document as it is called in the industry "the FDD".

is referred to as the

"disclosure" and is similar to a

mutual fund's prospectus that you

are given before you buy the fund.

It discloses the officers, financial

history, and earnings information

(if available) in all 23 required

disclosures the franchise company

is required to report to every

is a copy of the franchise

In Part One there must be information identifying the franchisor and

describing their business experience.




The Franchise Disclosure

Document is sometimes

referred to as the “FDD”

the

Some people still may ref

to it as a “UFOC”

the predecessor document

How will they compete with the “big names” if there are any?

Are there restrictions

Are they

Can you get out if you are

Ask for a copy of the Franchise

as it is called in the industry "the FDD". This is

nformation identifying the franchisor and




The Franchise Disclosure

Document is sometimes

referred to as the “FDD” or

the “Disclosure document”.

Some people still may refer

to it as a “UFOC” which was

the predecessor document


Information about any previous bankruptcies in which the franchisor

and its officers, directors and management personnel have been

involved.

A description of the franchise agreement conditions under which the

franchise may be repurchased or refused renewal by the franchisor,

transferred to a third party by the franchisee, and terminated or

modified by either party.

A description of the continuing payments franchisees are required to

make after the franchise opens. Plus the following:

1. Information about any restrictions on the quality of goods and

services used in the franchise and where they may be

purchased, including restrictions requiring purchases from the

franchisor or its affiliates.

2. A description of any assistance available from the franchisor or

its affiliates in financing the purchase of the franchise.

3. Descriptions of restrictions on the goods or services franchisees

are permitted to sell.

4. A description of any restrictions on the customers with whom

franchisees may deal.

5. A description of any territorial protection that will be granted to

the franchisees.

6. A description of the training programs provided to franchisees.

7. A description of the involvement of any celebrities or public

figures in the franchise.

8. A description of any assistance in selecting a site for the

franchise that will be provided by the franchisor.

9. Statistical information about the present number of franchises,

the number of franchisees projected for the future, the number

of franchises terminated the number of franchises the franchisor

has decided not to renew and the number of franchises

repurchased in the past.

10.The financial statements of the franchisors. A description of the

extent to which franchisees must personally participate in the

operation of the franchise.

11.Statistical information about the present number of franchises,

the number of franchisees projected for the future, the number




repurchased in the

12.A description of the extent to which franchisees must personally

participate in the operation of the franchise

How much money they make?

How long did it take for them to reach

breakeven?

Does the franchise company support them

Would they do it again?

Ask them anything you want. (Remember

they had to do the same thing when they

were thinking about buying

Day is like a Open House where the franchise company invites

potential buyers to the

the senior executives of the company.

company will let you look through their operating manuals or visit a

training class.

anywhere from 30 to 60 day

more in-depth review of the process download the Introduction to

Franchising

booklet below.

You are making what might be the biggest decision of your life take

your time and have fun




repurchased in the past.

A description of the extent to which franchisees must personally

participate in the operation of the franchise

-Ask them:

How much money they make?

How long did it take for them to reach

Does the franchise company support them?

Would they do it again?

Ask them anything you want. (Remember

they had to do the same thing when they

were thinking about buying-just like you)

-Discovery


potential buyers to the corporate headquarters. It's a chance to meet

the senior executives of the company. Sometimes the franchise


-The entire process takes

anywhere from 30 to 60 days, not counting any travel time.

depth review of the process download the Introduction to


your time and have fun!



A description of the extent to which franchisees must personally


It's a chance to meet

Sometimes the franchise


The entire process takes

s, not counting any travel time. For a

depth review of the process download the Introduction to



He eventually sold his company and started the Franchise Learning

Channel. Providing help and support to hundreds of men and women

who wanted to start th

the Roni Deutch Tax Centers helping them to establish their franchise

in the tax preparation industry. Lewis has experience in every phase of

franchise operations and development and is an easy guy to work wit

a great sense of humor. He is the FLC's resident expert in Master and

Area Developer franchises.

Call me with your questions at 800

[email protected].

How We Help

I’m associated with the

fee is paid by the franchise company

clients for our services. In other word our services are

should we decide to work together.

Matchpoint was founded in 2006 with a mission of helping companies

expand their franchise networks and improve their system profitability


Lewis Trio. Senior Mentor and President of

the Franchise Learning Channel. Lewis

brings his twenty years of experience both

as a franchise owner and a franchise

company president. He started his career

as a regional president of Fantastic Sams

where he helped develop some 70

franchises employing hundreds of people

and grossing millions of dollars annually.



who wanted to start their own business. Most recently he worked with



franchise operations and development and is an easy guy to work wit


Area Developer franchises.

Call me with your questions at 800-750-0094 or email me at

[email protected].

I’m associated with the MatchPoint Franchise Consulting Network

fee is paid by the franchise company, so there is no charge to our

clients for our services. In other word our services are free to you

should we decide to work together.

was founded in 2006 with a mission of helping companies


Lewis Trio. Senior Mentor and President of

the Franchise Learning Channel. Lewis

brings his twenty years of experience both

as a franchise owner and a franchise

company president. He started his career

as a regional president of Fantastic Sams

ped develop some 70

franchises employing hundreds of people

and grossing millions of dollars annually.



eir own business. Most recently he worked with



franchise operations and development and is an easy guy to work with


0094 or email me at

ting Network. Our

, so there is no charge to our

free to you

was founded in 2006 with a mission of helping companies



by reducing Franchisee recruitment costs and improving the quality of

new Franchisees coming into a system.

While there are many unique aspects of the MatchPoint Franchise

Consulting Network system, what makes MatchPoint different from all

others within the industry can be classified into three categories – the

three pillars of MatchPoint Franchise Consulting Network success:

Better Informed Quality Candidates:

Information and Education are the foundational elements of the

MatchPoint system. By pre-screening franchise candidates and

providing them with a base of information and education, all parties to

a Franchise purchase transaction end up winners.

In addition to providing potential franchise purchasers with the free

consulting services of a MatchPoint Consultant, MatchPoint is leading

the industry in providing individuals free online e-learning education.

Our modules include:

Franchising Basics (how franchising works, business structure,

are you cut out to be a franchisee?, principles of success)

How to Buy a Franchise (finding the right franchise, doing due

diligence, evaluating unit economics)

Franchise Marketing (attracting and keeping customers, referral

and loyalty marketing, building the brand)

Leadership and Motivation (goal setting, mentoring your team,

setting the standard, re-imagine your business and life)

Growing Your Business (positioning your business for growth,

technology and infrastructure, standards vs. growth)


Franchise Assessment Profile:

opportunit

In 2006 the Personal Franchise Assessment Test

MatchPoint. MatchPoint developed the MatchPoint Personal Franchise

Assessment Test after thousands of hours of de

Franchise field since 2004.

system helps individuals narrow the playing field to only those

Franchise systems that offer you the best opportunity for success.

Professional Franchise Consult

MatchPoint is committed to setting the standard for Franchise

Consultant expertise, professionalism and service. The Personal

Franchise Assessment Test provides MatchPoint Consultants with

unique insights into the skills, experience and personality

individual. This insight and knowledge helps the MatchPoint Consultant

identify the opportunities that best match an

MatchPoint operates the largest physical office of Franchise

Consultants in the industry, where Franchise Co

regular briefings from leading Franchisors around the world. Well

informed Franchise Consultants are uniquely positioned to offer the

best advice and value to individual franchise buyers.


Franchise Assessment Profile:

Through a unique and

sophisticated profiling

system called the

MatchPoint Personal

Franchise Assessment

Test, MatchPoint

consultants can help

potential franchisees

narrow the playing field

to only those franchise

systems that offer them the best

opportunity for success.

Personal Franchise Assessment Test was created by


Assessment Test after thousands of hours of dedicated research in the

Franchise field since 2004. This unique and sophisticated profiling

helps individuals narrow the playing field to only those


Professional Franchise Consultants:




unique insights into the skills, experience and personality


identify the opportunities that best match an individual’s needs.


Consultants in the industry, where Franchise Consultants receive



best advice and value to individual franchise buyers.

Through a unique and

sophisticated profiling

system called the

MatchPoint Personal

Franchise Assessment

Test, MatchPoint

consultants can help

potential franchisees

narrow the playing field

to only those franchise

systems that offer them the best

was created by


dicated research in the

This unique and sophisticated profiling

helps individuals narrow the playing field to only those





of each


needs.


nsultants receive




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