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Researching A Franchise

© Michele Marrinan

So you want to buy a franchise. Think you've found the perfect one? Perhaps you've asked yourself some preliminary questions (see "Courting a Franchise System," Feb. 9) and are ready to sign on the dotted line. Stop right there. Buying a franchise isn't that easy.

"I think that the most important thing that anyone can do is the research," says Howard Bassuk, president of FranNet, a franchise consultancy in San Diego, Calif. "There's a million different things that you should look for, from the subtle to the obvious. Each one can be critical." He adds that few prospective franchisees scrutinize enough of those points. Make sure you're not one of them. FranNet has come up with a four-step, in-depth research plan.

Step One

1. Read the Uniform Franchise Offering Circular. Make a list of questions as you read this disclosure document, which the law requires franchisors to provide to prospective franchisees. You should make one list for the franchisor and one for franchisees.
2. Interview franchisees. Bassuk recommends interviewing eight to 10 franchisees by telephone. You'll find a list of franchisees in the UFOC. Remember to take notes.
3. Add questions to the franchisor list. After interviewing franchisees, you will probably think of additional questions you'd like to ask the franchisor. Write them down. Then call the franchisor and get some answers.
4. Check your level of interest. At this stage, you should have a better idea of whether or not you want to buy this particular franchise. If you're unsure, perhaps you should look at another system.

Step Two

1. Revise your questions. Go over the notes from your first round of franchisee and franchisor interviews. Make a list of any new questions that you have.
2. Interview additional franchisees. Telephone eight to 10 different franchisees. Pose your original questions, as well as any new ones that you've added to your list.
3. Interview the franchisor. Pose any new questions, and remember to take notes!
4. Check your level of interest. If you're still interested, chances are this might be the franchise for you.

Step Three

1. Visit franchisees. From the 16 to 20 franchisees that you interviewed by phone, visit at least three. These visits will give you a first-hand view of the business. Ask yourself if you can see yourself in such an environment.
2. Check your interest level. Make sure you really want to do this.

Step Four

1. Visit the franchisor's home office. Put together a to-do list for this visit. Meet with key officers and support personnel, and make sure that all your questions are answered.

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