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In 1989, Tim Berners-Lee's World Wide Web changed the world.
His invention has enabled anyone with an internet connection easy access to copious amounts of information on any subject imaginable in a cost-effective way.
For example, if you’re thinking about becoming your own boss via franchising, you get to search several information sources like Franchise Direct. And better yet, the information is free.
That said, when your search for a franchise to buy transitions into finding a specific franchise that checks all the boxes for you, you’ll need to spend some money to turn your dream into a reality.
In this post, I’m going to talk about you where that money will be spent and why you need to spend it.
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Things You’ll Spend Money On Before You Buy A Franchise
If you’re going to buy a franchise, there are a few things you’re going to need to do before you sign on the dotted line.
The first thing you’ll need to do is determine if the franchise you’re interested in will enable you to make a living. The best way to do that is to put together a business plan.
According to my friend, Tim Berry, one of the leading experts on business plans, your business plan doesn’t need to be complicated. But you do need to write one.
<blockquote>“The process starts with a simple, lean business plan that covers the main points you need to write down. You can do this with simple bullet point lists and tables. Set down strategy, tactics, major milestones, metrics, and essential projections.”</blockquote>
In addition to knowing the numbers, if you’re going to need a small business loan to start your franchise business, your lender needs to have a business plan in-hand to approve your request.
The good news is that if you’ve never written a business plan, there’s help available.
Specifically:
A. You can purchase business plan software.
Most of the software available these days provides a line-by-line template. Your job is to fill in the numbers.*
*A great way to get those numbers is to contact a few existing franchise owners and ask them for help. You’ll be surprised by how many franchisees are willing to pitch in and help with the numbers. The franchisor may have some data you can use as well.
B. Business plan specialists.
There are a number of business consulting firms specializing in complete business plan writing services. If you don’t want to write the plan yourself, consider going this route. Just ask for references before you hire them.
C. Contact the Small Business Development Center near you.
SBDC’s (largely funded by the U.S. Small Business Administration) generally have business counselors on hand who can help you write a business plan. There may or may not be a cost involved, so check first. In addition, if you already have your business plan prepared, a counselor can take a look at it and if needed, offer useful suggestions.
Franchise Legalities
The second thing you’ll need to spend money on before you formally purchase the franchise you’ve decided to buy is an experienced franchise lawyer.
Why?
Because the Franchise Disclosure Document (FDD) and the franchise agreement you’re required to receive are detailed legal documents that are normally long, a couple of hundred pages in the case of the FDD. You’ll want to hire a franchise lawyer to go over the documents so you have a complete understanding of them.
But those aren’t the only things a franchise attorney can assist you with.
For example, if you’re buying a franchise that requires commercial space you’ll need to have a complete understanding of the commercial lease you’ll be required to sign.
Briefly, a commercial lease is a multi-page legal document that spells out what your monthly rent will be along with specific information about utilities, insurance, property taxes (if applicable), maintenance responsibilities and more. A franchise attorney will help you understand the lease and even help you negotiate the best possible terms for your lease.
Additionally, a competent franchise lawyer can help you determine the best business entity for you. Once that’s decided, she or he can file the necessary papers with your state.
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To summarize, you’ll need to spend some money before you finalize your purchase of a franchise. But if you choose the right franchise for you, can acquire the necessary funds to support your new business and set up yourself legally sound, it will be money well spent.
The Franchise King®, Joel Libava, is a top franchise expert. He’s written over 2,000 different articles on franchise ownership and personally consults with people who are looking to buy a profitable franchise. Go here to find out how The Franchise King® can help you become your own boss.