With over 1,000 existing franchises in the U.S., the task of selecting the right franchise can be daunting. As part of this process, entrepreneurs invest time researching in order to identify a group of attractive franchises that match their criteria. A good practice is to narrow down the list of interesting franchises to a “finalist group� composed of three to five top candidates. Each candidate is then carefully assessed until a final selection is made. To assist in this process, the prospective franchisee can consider the following: Select a novel concept for the market – Prospective franchisees should not only make a selection that matches their skill and interest. As with every business, they must also select a candidate that would offer something novel to the specific new business location. Conducting a thorough market research is key to evaluate the potential success of the selection relative to the markets served. Consider a candidate with proven success – Selecting “a franchise� as your business does not ensure automatic success. The more successful the franchise candidate’s history, the more potential for future success it will have. A new franchise with just a few months or years of history may still need some time to be proven. All the other business success factors are required, such as the right management, the right location and the right market positioning. Detect a strong franchisor commitment – This is a critical ingredient for a fruitful franchise relationship. If the support and assistance of the franchisor ends as soon as the franchise contract is executed, the franchisee will have less opportunity to thrive. Potential franchisees must learn about their franchisor and evaluate the type of people with whom they would have to work with in the coming decade (the typical franchise contract duration). The franchisor must be fully committed to helping the franchisee through the entire relationship, not just “take the money� at the beginning and disappear. In addition to conducting due diligence from written sources, the entrepreneur should speak with other franchisees to get feedback regarding how the franchisor operates the franchise network. Consider the potential evolution of the franchise network – Franchisees considering multiple unit ownership should leverage the opportunity of negotiating multiple franchises simultaneously instead of just one for cost containment. Develop a Business Plan – A good business plan will reveal important aspects for consideration. The prospective franchisee can evaluate each franchise candidate considering general business plan elements. For example: • Competition and industry perspectives • Feasibility plan • Local market concept adaptability • Franchisee profile • Necessary investment and financial projections An excellent source of assistance for franchise selection is “The Franchise Opportunities Handbook,� published by the U.S. Department of Commerce, which describes over 1,400 companies that offer franchises. This document is a good resource for any businessperson seeking to survey and contact franchisors of interest to request information, and then compare their offers. Additionally, companies such as “Entrepreneur.com,� publish listings and annual evaluations of franchises. To conduct their final evaluation, and prior to signing the franchise agreement, the potential franchisee should consider engaging independent counsel who could assist in this important decision. The entrepreneur must not completely trust everything that the franchisor states or everything that the franchise documents promise. Franchisees must verify and evaluate all the facts with the help of an attorney of their preference. An attorney experienced in franchise and commercial law will effectively assist in reviewing the franchise disclosure documents, negotiating the franchise agreement, legal formation of the business, proper licensing, negotiating the lease, developing employee contracts, and providing overall counsel in other relevant areas, as needed. The next articles in the franchise series will address the content of the franchise contract, negotiating the contract, and issues that arise in breaking the franchise contract.

Copyright - 2010 Yasmin Tirado-Chiodini. All Rights Reserved. Yasmin Tirado-Chiodini is a business attorney and entrepreneur practicing business law in Central Florida. For more information, contact Yasmin@Tirado-Chiodini.com or visit www.doesyourcompasswork.com. This article does not intend to provide legal advice and is provided for informational purposes. For legal advice, the reader must consult an attorney of their preference.