Doing the research takes time, but it is not hard. There are several musts, and you must do each and every one to insure yourself the best chance of making a good decision.

We have talked in previous articles about how to identify what your personal objectives are in selecting the kind and type of franchise opportunity that would fit your personal skills, goals and strategies. Armed with that model you are ready to look at specific franchises to see how they and you fit together.

Knowing who you are and what you want to achieve in business will help you to identify businesses that match up with your goals and strategies. Once you have identified a few of those businesses you are now faced with the biggest and most important task in selecting the franchise system you ultimately become part of: RESEARCH!

Doing research on a franchise opportunity is a lot like peeling an onion. You do your research layer by layer until you reach the center. You MUST be prepared to walk away from any and/or all of these businesses if, as you peel away “another layer of the onion," you find something that does not properly match up with your personal abilities, business strategies, or ethical standards.

Doing the research takes time, but it is not hard. There are several musts, and you must do each and every one to insure yourself the best chance of making a good decision.

We have already said that we want to make sure that any franchise organization that you investigate should meet certain criteria. Briefly, any franchise you become interested in should be:

• In a Stable Industry.
• An industry leader (regardless of the industry's size).
• Affordable to you.
  
• Very good at their core business.
  
• In a position to expand and grow.
• One of future vision.
  
• In a non-consolidated industry (your competition is not made up of major chains with great competitive strength).
  
• Provide and excellent and much needed product and/or service.
  
• An acceptable level of risk from your point of view.
  
• Ethical, and franisee-friendly franchise

Having satisfied yourself that the franchise you are looking at meets the above criteria, you now focus on the issue of the specific franchises you are interested in, and how YOU will fit in. These are the research steps you will want to do to accomplish this:

1. Review the franchisor's brochure and video
Invite other family members to review the information with you, particularly if they're going to work in the business with you. You'll want the support of family members as you make the decision to pursue your dream. One point of caution as you seek opinions from other people: comments like “all franchises are good” or “all franchises are bad” won’t help you. Don’t get scared if you hear them. Stick to your investigation. The truth will soon reveal itself as you complete your research.

2. Create a list of questions
As you review the franchisor's sales information, record a list of questions. Write down as many questions as occur to you or others who review the information with you. Continue adding to this list as you progress with your research. Eventually you will refer to this list when you meet with franchisees and the franchisor face-to-face. You'll want to be sure to get every question answered. Never be afraid that a question is silly, stupid or unimportant. This is your business and your future, and it is critical that you do it right!

3. Complete the franchisor's questionnaire
Unless you've found some reason not to proceed complete the franchisor's questionnaire -- you'll find it in the sales literature. If you work with consultants or brokers, they'll want you to complete a similar questionnaire. Fill them out. (The consultant's questionnaire, as a matter of fact, may be acceptable to all franchisors on your list, so you may not have to fill out more than one questionnaire.) Franchisor want to know your background and interest before proceeding with you. Franchisors won't take you seriously until you submit a completed questionnaire. If you want the franchisor to invest time and effort in you, you must do the same for them.

4. Request a copy of the Uniform Franchise Offering Circular (UFOC)
Once you have filled out the questionnaire, the next step is normally for you to be given the legal disclosure document called the Uniform Franchise Offering Circular (Also referred to as disclosure document, offering circular, UFOC, etc.) If you meet the franchisor face to face, and you discuss the sale /or purchase of the franchise, you must, by law, be presented with this document at that meeting. When you get the UFOC you will sign and date a receipt for it. You cannot invest in the franchise for 10 business days from the date on the receipt. By the way, receipt of the disclosure document does not obligate you in any way to invest in the franchise. Furthermore, you do not pay any money for the disclosure document.

5. Make a list of key information form the UFOC
Read this circular CAREFULLY! As you do, rcord a list of questions and key issues. Keep an eye open for "deal breakers". There will be all sorts of good information in it on over 20 different topics, including the background of the officers, any litigation that the franchisor is involved in, audited financial statements on the franchise company, your costs and obligations, their obligations, any statements on projected sales and/or earnings and perhaps, most importantly, a list of all the franchisees! To me, this list of franchisees is the key to the entire selection process

6. Plan to call 10-20 of the franchisees listed in the UFOC
I recommend that you think of the other franchisees as your best opportunity to insure that you are making a good decision. You should contact a minimum of 8-10 of the franchisees the very first week you are doing research, and talk to them. Make sure you seek out the right type of franchisees. If you plan on having multiple stores, or locations, talk to some owners who are still building them, talk to some owners who have succeeded in establishing multiple units, and talk to some owners just starting up to see if anything has changed from when the more established franchisees started.

Initially, call the franchisees by phone. Have a series of questions ready to ask them. One very key element in doing your franchise research is to confirm that most of the franchisees are doing well, and would join the system again.

You are not only trying to discover how well they do, and how they rate their franchise experience, but also WHO they are, compared to who you are. You should also make sure you seek out and find some franchisees who are doing extremely well, and also some who are doing extremely badly, or have failed.

While franchisors will often tell you the names of successful franchisees, they may be hesitant to tell you the names of those who are struggling and failing. Don’t let that deter you. Ask the other franchisees who they know is NOT happy. Chances are that they know each other and will be willing to give you names. You want to make sure that the business is not only a good business in general but that the people who do well in it run the business the way you would. If you find that you would run the business more like the people not doing well, disqualify that system from your search immediately.

7. Plan to visit three to five franchisees after you've contacted 10-20 franchisees by phone
Go visit several franchisees in person. When you interview the franchisees, ask any questions you like. Be tactful, and discreet. Make sure the time for your visit is convenient. Below are some sample questions that you may find helpful to ask when you are investigating.

• How long have you been in the business?
• How are you doing in your business?
• Are you pleased with your earnings?
• If the franchisor made earnings statements in their UFOC, are your earnings close to what the franchisor predicted?
• Are you working full-time in the business?
• Do you see your volume growing?
• What is your best estimate of your annual growth?
• Do you find that your location meets your customers’ needs?
• Who picked your site?
• Are there seasonal highs and lows?
• How would you rate your ongoing support?
• How would you rate your training?
• Does your franchise support you with advertising and promotional programs?
• If you had to do it again, would you buy this franchise?
• Are you aware of any franchisees that are not doing well?
• Would you share some of your monthly costs of doing business with me?
  $ Rent
  $ Utilities
  $ Advertising and Promotions
  $ Labor Costs (or payroll)
  $ Insurance
  $ Other
• How much capital do you recommend?

8. Plan to visit the franchisor's home office
Go visit the franchisor. Don't skip this step. Lots of people try to cut corners at this point. They minimize the trip to the franchisor's home office. I advise against that. This is the best opportunity to see the franchisor in action.

The franchisors should want to see you. Some, in fact will require you to visit the home office in advance of investing in the franchise. Frankly, if the franchisor isn't interested in sizing you up, too, and making certain that you'll fit the franchise opportunity, you should drop this franchisor from your list.

Now, go back to the franchisees and verify the answers the franchisors provided. Go back to the franchisor again, if necessary. Make sure you understand the business, and that you are comfortable and confident in your ability to manage the business successfully.

9. Use the service of professional advisors, including an attorney and an accountant experienced with franchising
Finally, consult with a franchise attorney. Don’t overlook the guidance that can be provided by professional advisors. Accountants, financial planners, consultants, SBA and Score advisors, are all good resources. Call the International Franchise Association (202-628-8000) for recommendations of advisors, including attorneys. Also, contact the American Association of Franchisees and Dealers (619-235-2556 or 800-733-9858) and find out if there is a local Franchisee chapter. Check with that chapter. Make sure it is a franchise attorney, so that you have an expert in franchise law. American Association of Franchisees and Dealers (AAFD) can also refer you to an attorney.

If all has gone well, you're finished with your research and you're ready to invest in a franchise. The process may seem arduous and long, but it is really not that bad. The key is not to settle on a business that you don’t fit well with, or that is not of the quality that you need. Researching each business carefully, and not only analyzing them, but also comparing several to each other, should be the key to doing a good job on making a good decision for yourself!

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