By Steve Murphy, president of Franchising at Winmark Corporation
There are many resources available, online and offline, for finding the
right franchise. Just be careful that you find the right resource and
understand the limitations of each. And remember, for all the resources
available, the tried and true method of finding the right franchise still
comes down to doing your own homework, talking to existing franchisees
and checking out the franchisor thoroughly by analyzing a few key metrics.
One of the first places people search for the best franchise opportunities
is the internet, specifically via Google search or some other search engine.
It is important to realize that the results that appear will be both advertisements
(paid for by franchisors) and generic (organic search results based on
relevancy). On Google specifically, the top four results today are paid
placements by franchisors looking to get in front of franchise candidates
(the right hand bar results no longer appear on Google – instead,
they have the top four results as listed advertisements and several more
paid for results at the bottom of the page). That does not mean these
are not the best franchises – Winmark utilizes Google AdWords as
a means of getting in front of candidates as many other franchisors do
as well – it simply means that these results are the effort of bidding
on and winning certain search terms you may be using to find the right
franchise. Many of these search terms are fairly generic, such as ‘best
franchises’ or ‘best franchise opportunities.’ The more
specific you can be in your search term, the better your paid and organic
results will match your desired franchise (for instance, ‘best kid’s
franchise’ if you are interested in focusing on a business servicing
children’s needs.)
Another common approach to finding the right franchise is to utilize one
or several of the many franchise portals that exist on the internet. These
portals are aggregators of multiple franchise concepts that pay them an
advertising or slotting fee to be a part of their site. They are, in essence,
an online franchise catalogue for prospective franchise candidates to
help them in finding the right franchise. Some of them offer content on
franchising, some offer franchisee profiling to help you find the right
franchise, and some even offer grades for franchisors to help you identify
the best ones. The important thing to realize as a franchise candidate
is that in most cases all of these franchisors have paid a fee to be a
part of this site. You will only see a small sampling of the 3,500+ franchises
that are available to you as a future business owner, and you may not
find the perfect franchise due to the limited scope of participants. Don’t
get me wrong, portals can be an effective means for finding the right
franchise, but they are subjective in nature in that you have to pay to
play as a franchisor. Many of the top franchisors will not be found on
these types of sites as they do not need to use them as a means to grow.
Utilize them as a tool in your arsenal, but by no means should you think
of them as a complete solution for you to find the perfect franchise.
An offline resource for finding the right franchise is the business or
franchise broker networks that are available to you. There are several
franchise brokerage companies to choose from, giving you the option of
finding the right person to work with to help you in your endeavor. These
are great resources with people who are familiar with franchising as a
business model and can help you get a better understanding of the franchising
world and the different types of franchise opportunities that exist. However,
again you are dealing with a very subjective medium. Franchise brokers
make their money from commissions or finder’s fees from the franchisors
they represent. In other words, the only franchise opportunities most
brokers will present to you will be those for which they have agreements
and will receive commissions should you move forward and sign a franchise
agreement. If your desire is to look at all franchise opportunities in
a specific business segment, realize that a broker may not introduce you
to every franchisor in that segment and that more homework on your part
may be needed. It is important to ask a broker who they represent and
how they work before you begin that relationship.
There are also several trade magazines, websites and periodicals that are
available in helping you find the right franchise. These range from complete
lists of franchisors to news and information on the latest, hottest, fastest
growing franchises. All are wonderful resources to give you a better idea
of the landscape of franchising. However, just because a franchise is
on someone’s ‘hot list’ does not mean that is the right
choice for you. Franchising is full of hot trending businesses –
often times seeing explosive growth in specific segments that cater to
the masses for a short period of time. You can see this in the fitness,
food and service industries specifically; where today’s hot franchise
is tomorrow’s dead fad. As a franchise candidate, do your homework
on the concept and be sure you are comfortable that it will be a business
that will give you a return both in the earlier years as well as the later
years. You are building an asset to sell one day – which means that
what you invest today, you want to get back plus some multiple of that
return when you transition out of the franchise.
The best advice any franchisor can give to a franchise candidate is to
utilize all the resources available to find the right franchise, but at
the end of the day, do your own homework. Nothing beats due diligence
in finding the perfect fit. Discover what you are passionate about, find
the right franchise servicing this industry or opportunity, and do your
research on the franchisor. The best way to accomplish this is to thoroughly
review their Franchise Disclosure Document (FDD), specifically their Item
19 Earnings Claim, to see if their franchisees are making money. Then
call several franchisees and ask them specific questions about their level
of success, their level of happiness and what they like and do not like
about the business and the franchisor. Finally, take a look at how many
franchises are renewing at the end of their term – this will be
a great indicator on what they think of the business, the franchise and
the franchisor. Any franchisor renewing 90+% of their franchisees every
10-year term, has a long standing track record of success in a business
that is viable, and is not susceptible to downward trends is a good place to start.
