Whether you’ve always dreamt of owning your own Colorado business, or you’re ready to leave the 9 to 5 rat race and start a new chapter in your life as a business owner, investing in a franchise is a great way to get started. There are literally thousands of franchise opportunities available across all industries and all investment levels. From fast food to senior home care to education, there’s no doubt you can find plenty of franchise opportunities in Colorado.
So, what exactly should you look for (and watch out for!) when seeking franchise opportunities in Colorado – or anywhere else for that matter? Where can you turn for help when exploring opportunities? In this post, we’re going to answer all these questions!
Where to Look for a Good Franchise
An established franchise gives you the benefits of starting your own business, along with a lot of extra support that the franchise model offers. Buying into a franchise gives you the framework and business model, along with the scale and credibility of the brand, while still allowing you the freedom to manage the business “your way” and stay in control.
There are many good sources of information about franchise opportunities. For most people, the process that makes the most sense is to first make sure you understand the business model of franchising. After you’re clear on what franchising is all about, then you can try to identify industry segments that may be of interest to you. Finally, you can research individual companies to see which ones match best with what you are looking for in a franchised business opportunity.
There are also many good reference works and periodicals you can use to understand franchising in general and business format franchising specifically. The best sources to rapidly access this information at a very reasonable cost are:
- A good bookstore
- The public library
- Internet web sites
The best way to scan industry segments to find ones that potentially have interest for you is to refer to lists compiled and organized by others. These lists usually contain information on many companies segmented by industry. One of the best organized is the Entrepreneur 500 (January issue each year). Spend some time looking at the investment level requirements and thinking about what the pros and cons of that particular industry might be. Make a list of the ones that you are qualified to pursue financially.
The final step is to research individual franchise companies. You will find that your best and easiest source of information is the franchise itself. Most franchise companies are set up to deliver the information you need to evaluate the opportunity. Make sure to carefully consider all the following sources:
- The initial package. Most franchisors have brochures, videos and web sites that will give you a good overview of the opportunity.
- The FDD. The standard disclosure document that all franchise companies have will provide you with information about the company history, the background of all key executives, costs and fees, obligations of the parties, litigation experience, success rate information, audited financial statements, earning’s claims (optional), and a list of existing franchisees for you to contact.
- Existing franchisee calls. You should contact a number of the existing franchisees for any system you are interested in. You want to ask them about the training programs, the initial and ongoing support they have received, the effectiveness of the marketing programs they use, what purchasing power benefits they receive, and what the relationship with the franchisor is like. You will also want to confirm both the investment information and the earnings potential of the business during these calls.
- Meeting the franchisor. As a final step before selecting a franchise, it is always a good idea to personally meet the franchise staff you will be working directly with. Make sure you feel comfortable with their professional competence and with your ability to work with them in building a business together.
Once you have gathered all the information you need, make a decision and move on. Remember, don’t compromise on your goals. When you find a franchise that’s right for you, you’ll know it.
Along with where to look, there are some things to “watch out” for when researching franchise opportunities in Colorado.
Red Flags When Researching Franchise Opportunities in Colorado
While the franchise system offers many benefits including “lower” risk, like any business, even an established franchise can be risky. Here are some red flags to watch out for when researching and considering franchise opportunities in Colorado (or anywhere else).
• Unresponsive Franchisor
As you’re researching opportunities, you’re going to have a lot of questions. That means communicating with the franchisor and their representatives. If they are slow to return emails, not returning calls, or unable to give you a straight answer, it should raise a red flag.
Imagine being locked into a contract… In the beginning stage of any relationship, both parties should be working to put their best foot forward. If the franchisor is making a minimal effort at this stage, what will happen when you need them? Walk away.
• Franchise Fees Seem Higher Than Other Similar Opportunities
You’ll have to dig deep here. This is something that will only come to light when you’re doing serious due diligence after having narrowed your choices. In every franchisor/franchisee relationship there will be several fees. Typically, there is an initial investment and often ongoing royalties paid by the franchisee to the parent company.
Fees are an area that requires special scrutiny. You need to understand exactly what you are paying for. In some cases, a franchisor may charge higher fees, but may also offer more in-depth training or enhanced services like help scouting and securing a location. Always look closely at what your fees cover.
• The Brand, Product or Service Offered Is Trending Downward
If a potential franchise you’re considering isn’t doing well overall, it’s a huge potential red flag. Before signing anything, make sure you do your research. Is there a negative perception with the general public? Has there been bad press? Are there any existing locations up for sale or have closed? Are there any past or recent litigation in the system?
Having a strong company and a solid brand behind you is crucial to the success of a franchise business. Without it, it can be much harder to succeed. You can learn a lot about the health of a franchise by speaking with current owners. If they don’t have anything positive to say, you may want to consider another opportunity. Similarly, if you have a “gut feeling” that the franchise is just not a good fit, it’s probably a good idea to go with your gut and keep looking.
Cut Through the Clutter with a Franchise Consultant in Denver
If you’re not sure what type of franchise you’re looking for or having trouble knowing what you don’t know, consider engaging a franchise consultant to help you.
A good franchise consultant will work with you to understand your goals for business ownership, your motivation for being a business owner, and will dig deep to clarify and define your strengths and weaknesses to better match you with franchise opportunities in Colorado that can meet your needs.
From defining your talents to determining your spending tolerance, finding the right franchise opportunities can be overwhelming. A good franchise consultant can help you understand who and where to get specific information. In certain cases, you may be looking for a low investment/high margin opportunity or a larger investment with a rapid break-even potential.
Like anything else in life, not all franchises are created equal and no single opportunity is the right fit for everyone. Having the guidance of an experienced franchise advisor can save you time, money and prevent a tremendous amount of frustration while helping you to avoid costly mistakes along the way. Remember, educating yourself, and working with a quality team is the most important element of the purchasing process. Interested in our franchise consulting services in Denver? Give us a call or fill out a form.