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Finding the Right Franchise – Tips on Spotting Winners

How do you separate winning franchises from the mediocre? Whether you want to run a restaurant, a home improvement business, or a marketing firm, there are definite signs that point to a winning formula for success.

You must examine the franchise opportunity from several perspectives: as a owner/franchisee, as a customer, and as a competitor.

First of all, do the due diligence about the financials detailed in the Universal Franchise Offering Circular (UFOC). What are the bottom-line basics – how much do you have to invest, when can you expect to break even, and when will you make a profit? You must review the numbers with an accountant and thoroughly understand your own financial situation and the franchisor’s overall financial track record. Check out Guide to Buying a Franchise for more information about understanding the UFOC.

Does the franchise belong to a respected industry trade organization, such as the International Franchise Association, or other professional industry groups, like restaurant or retail associations? Membership in trade organizations indicates a commitment to the industry and probable adherence to ethical business practices.

Is there a detailed Operations Manual? Proven practices are what franchise systems are all about, and the Operations Manual should spell out how each individual franchisee can best manage the business.

What are the internal communications channels between franchisees and the franchisor? Will you have ready access to a Master Territory Manager or senior management at corporate headquarters? How are grievances mediated? Is there a formal process mapped out in the UFOC?

Talk to other franchisees. Get references from the franchisor, and if not supplied, be suspicious. Do some detective footwork to find other franchisees who can tell you about their real-world experiences running their business and the support they receive. The Franchise Research Institute (FRI) offers an excellent resource for prospective franchisees. For a modest fee, you can buy a customized survey ( http://www.fransurvey.com/) that provides feedback from the franchisees of a franchise brand.

Looking at the business from a customer perspective, does the franchisor have a well-known trademark brand? Consistency and brand recognition define the franchise experience, and any “franchise” company without them is at a distinct competitive disadvantage.

If possible, visit franchise locations as well as the competition’s. Observe the property condition – is it clean? Is the establishment using uniform proven procedures? Do the employees seem happy? Sure, they might be low-paid teenagers, but they still could enjoy their jobs if treated properly and that will be reflected in a cheerful attitude toward service. Happy employees beget happy customers – and that is how you win in business.

If it’s the type of franchise without a fixed location, i.e. a house painting company or gutter replacement service with an 800 number, then call the company as if you were a customer. Do you get right through to a customer representative or shunted into voice mail? Once you’ve got a company rep on the phone, ask picky questions about the services and prices, and see how you are treated. A five-minute phone call can tell you a lot about the company.

You may have to resort to guerrilla tactics to get a handle on the competition. Don’t just get a UFOC from one franchise, get the competition’s too. See how their operations differ, and compare the financials. Are there glaring disparities? It may seem underhanded, but you are putting your money and future at risk, so you must investigate the franchise from every angle. Obtaining a UFOC imposes no legal obligation on your part, and you can get a big picture about the industry in general instead of just one particular franchise.

Finding a winning franchise is all about doing your homework, and though it may seem time consuming and tedious, in the long run it’s worth the effort. It’s your money, invest it wisely.

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