Buying a restaurant franchise is a big step. Once you have found a franchise you are interested in and before you sign your name on any papers, do your due diligence and homework first. Here are a few steps to steer you toward your decision.
1. Research the company’s long-term viability. What is their track record? Is their food good? Are they a start-up? Expect to go into a partnership with a 10-30 year commitment. If they are not in it for the long haul, look elsewhere.
2. Study the Franchise Disclosure Document. The Franchise Disclosure Document (FDD) includes important information about the company including the solvency. This information is required by law to be disclosed.
3. Ask about the management team. Is the team comprised as individuals who work as a group? Do they have a successful track record? If you need counsel moving forward, these team qualities will be beneficial to you and your business.
4. What is their overall return on investment? Determine the projected overall investment return as this information will give you long-term insurance on the success of your partnership. You need to know what the profit is versus liability.
5. Examine the market you want your franchise restaurant to be located within. Look for an established market area with minimal risk as opposed to a pioneer territory (or state). Many companies have exclusive rights within three to five miles around an existing territory, so make sure you are not in too close of proximity of another location. 6. Find out how hard it is to operate. Is it fairly straightforward with the right guidance and training from the franchisor? Some are easier to follow while others are more complex. Do your research.
7. Investigate the average system sales growth. It is a good sign if strong resources are available and the company backs ups franchise operators. How are the sales going with other stores in the franchise? This is good information to know.
These are only some of the steps you can take to determine whether a franchise is a good option for you. For further help, contact us to run through the rest to determine if franchising a restaurant is in your best interest as an entrepreneur.