There are literally thousands of lists of “Top Franchises to Buy” on the Internet, and all of them have some kind of logic behind them. The problem is that “some kind of logic” isn’t necessarily your kind of logic. This is a guide to understanding your logic and learning how to apply it to your personal ‘Top Franchises to Buy” list.
Step 0: Start With What You Love
The first thing you need to do is cross off 95% of the potential franchises in the world by crossing off anything and everything you don’t care deeply about. The single most important indicator of success among people who actually sign a franchise deal is that they are dedicated to the idea they sign onto. If you don’t start with passion, you’ll never end with a profit.
Step 1: Understand Your Limitations
Every franchise has certain requirements — some more than others — and your personal ‘Top Franchises’ list is going to have to automatically cross off any that you simply can’t meet the requirements of. The most common forms of requirement are:
- Funding. Far and away the most common requirement for people that want to buy into a franchise. Franchises require a lot of money to start up, and then even more to keep afloat until you start turning a profit. If you don’t have the financial backing, you don’t have a franchise, period.
- Net Worth. Some franchisers additionally require you to have a level of personal net worth before they’ll consider you — $250,000 in semi-liquid assets is a fairly common requirement. Again, if you don’t have it, you’re out of luck.
- Education. More rarely, but still known to happen, a franchiser might require you to have a certain level of education or even a certain specific major, minor, or degree in order to consider you a viable candidate.
- Legal. Finally, you have the requirements that aren’t inflicted by the franchiser, but by the government. If you can’t, for whatever reason, get all of the licenses, permits, and so on, you’re going to have to look at a different franchise opportunity.
Step 2: Can You Turn a Profit?
Once you’ve crossed off all of the franchises that are “hard nos” because of Step 1, its time for the hard work: crossing off any and all of the franchises that don’t have a business plan that shows you turning a solid profit sometime between 15 and 30 months out. Any longer than that, and you risk a ‘black swan’ event ruining you before you start getting your feet under you; any shorter than that, and you have to ask yourself if you wouldn’t be better off establishing yourself as a competitor to that franchise rather than becoming a part of it.
Similarly, if the profitability isn’t significant after a few years, you’re running the risk of a small economic downturn or a shift in the market wiping out your profit entirely in the first place. Before you move on, do all the work you need to in order to cross off any franchises on your list that aren’t going to be reliably, decently profitable within a reasonable timeframe.
Step 3: Will They Help You When You Need It?
Every business owner needs help somewhere along the way — franchise owners should be able to expect it from their franchiser. But not all franchisers play ball, so before you make any decisions, you need to cross off one last group of franchisers: those who fail to offer meaningful assistance in each of these four key areas:
- Management: the tools you need to recruit, train, and manage employees.
- Location: assistance in finding and acquiring the right place for your franchise.
- Budgeting and Cost Control: the structure you need to stay afloat until you turn a profit.
- Key Business Activity: whatever your franchise actually does to turn a profit, there should be an ample amount of help available to ensure you can do it as well as the home office knows how.
Congratulations! Now that you have all of those franchises crossed off, arrange the rest according to your personal ROI/Job Satisfaction needs, and start applying. When you do apply, be ready to deal with the company’s franchise recruiter. This is the person whose job it is to “sell” you on the benefits of buying into that particular brand.
Another way to go is to work with a franchise broker. Brokers are under contract with several hundred of the top regional and national franchise brands and they are not “captive” to any one particular company. This frees them up to do all the leg work for you and help you find your top franchise to buy – based on your passion, skills and budget.