Buying franchises can be complex if you are doing it by yourself. Having the right advisors and professionals can make this process less complex and, in fact, enjoyable. There are various factors to consider before investing, including different franchise business models, unique location performances, and many financing options available.  

Learn how to buy a franchise in five steps—and why having a franchise consultant is essential to maximize your investment for long-term success. 

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How to Buy a Franchise in Five Steps

A person buying a franchise store in a shopping cart

Here’s a step-by-step guide on how to buy a franchise. 

1. Conduct Preliminary Research On Franchise Models You’re Interested In

While the process of buying a franchise has set standards, each type of franchise business model has unique licensing requirements and operational differences. For this reason, the first step is knowing which franchise model you’re interested in and then researching to ensure it’s the best fit before investing—especially if you don’t know how to buy a franchise.

For example, in a Business Format Franchise, the franchisor will grant licensing to provide you (the franchisee) with the approved vendors and suppliers needed to own and operate their business. They have pre-negotiated bulk purchasing power that enables you to buy at wholesale or even lower costs. On the other hand, an Investment Franchise is when the franchisee is granted involvement with overseeing the business but is more reliant on the franchisor’s involvement and may have to purchase their good from the franchisor.  

Preliminary research on franchise models should include:

  • Reviewing Government Resources: The Federal Trade Commission (FTC) and Small Business Administration (SBA) offer helpful information to get you started. 
  • Reading the Franchise’s Better Business Bureau (BBB) Profile Reviews: Look at what customers are saying about the franchise to reveal their average consumer performance for their products or services. While these reviews are usually site-specific, they can still be important information during the due diligence process. Current franchisees in the system are the real deal when trying to validate the franchisor and its system in the long run. 
  • Attending Corporate Training Classes: Learn how to effectively own and manage the franchise model, like technical experience and specialized training.
  • Analyzing Location Demands: Visit the potential location onsite for customer traffic and local competitors. 

2. Work with a Franchise Consultant

Having a franchise consultant by your side is one of the best investments you can make when purchasing a franchise. They help guide you throughout the franchise buying process to ensure you make profitable decisions, minimize investment risks, and find the best franchising opportunities to buy into. Always review the franchise consultant’s resume, LinkedIn profile, and history. This information gives you more comfort by knowing them better and leveraging their expertise accordingly.  

Franchise consultants may be a good resource while investigating the following:

  • Local market analysis and understanding of encroachment concerns
  • Franchise financial prerequisites and if you qualify
  • Ongoing mentorship
  • Budget planning for initial investment 
  • Franchisee relations and validation 
  • Funding assistance with SBA lenders or 401K ROBS programs. 

Franchise consultants will guide you on how to invest in a franchise with your financial goals, business model performance, and budget in mind. 

3. Request a Copy of the Franchisor’s Disclosure Document (FDD)

A person evaluating a franchise's local performance on a clipboard stand

The FTC requires the franchisor to supply a Franchisor’s Disclosure Document (FDD) to potential franchisees within 14 business days before signing agreements or making payments. This information is crucial to review before buying a franchise as it breaks down its financial/legal history, operational/ownership costs, and liabilities.  

Review the following key information in FDDs:

  • Business background
  • Litigation history
  • Senior management team history
  • Initial and ongoing operating expenses
  • Franchise business models, like the initial term, renewal fees, royalties, and marketing fees 
  • Financial investment requirements with the minimum and maximum tables 

We recommend having a franchise consultant and/or attorney review FDDs after you review them with the franchisor to help clarify any items you are unsure of. The franchise agreement will also be exhibited in the FDD for you to review. This is a template of the current agreement and isn’t specific to you. 

4. Evaluate the Franchise’s Potential Earnings

After reviewing the FDD, you may use its data to help calculate your potential earnings while creating your business plan or model. This calculation will determine how much money you may be able to earn. Always review these projections with your accountant to ensure you’re considering everything on the expense side, such as occupancy costs (rent or mortgage), debt service, and owner draw to sustain your monthly expenses. 

We also highly recommend working with franchise consultants or accountants to evaluate a franchise’s potential earnings. They offer more accuracy with specialized tools and expertise as FDD data can be comprehensive or often aggregate data from multiple franchise units that may not be similar to markets you plan to develop.  

5. Create a Financing Plan

The last step of buying into a franchise is deciding how you’ll finance it. It determines how much money you’ll need to invest and if you’ll need financing assistance. There are multiple ways to finance a franchise, including equipment finances, bank business loans, business credits, HELOC, 401K Roll Over (ROBS), and SBA loans. 

A franchise consultant can also help you create a financing plan and find the best financing options based on your budget, credit score, and whether you’re purchasing a franchise alone or with partners. 

Secure Long-Term Success: Buy a Franchise with Franchise Consultant Support

At Atticus Franchise Consulting, we can help you every step of the way when buying into a franchise and continuously to ensure your long-term success. We can support you through each phase, like growth planning, securing funding, and assisting you with a greater ROI. 

Ready to buy a franchise business? Don’t do it alone. Seek help, minimize financial risks, and save time your time.  

Learn more about what our franchise consulting services can offer you, or contact us for a free consultation today! 

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