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The Ten Point Punch List for Acquiring a Franchise

Starting a franchise in a recession takes more than a little luck and a dream.   Here are 10 steps to selecting the right franchise in the down market conditions expected for 2009.

  1. Self Evaluation. Ask yourself what you really want to achieve by owning a business.
  2. Financing. You'll need to have a clear idea of how much money will be available to you.
  3. Evaluate industry categories. The Entrepreneur Franchise 500 published each January is the most comprehensive.
  4. Look for recession-resistant segments. Ask yourself a simple question: "Do I believe this is a business that will continue to do well regardless of the state of the economy?" This will be true of businesses like damage restoration, fast food, senior care or hair cutting, but it may not be true of others like optional expensive services businesses or upscale retail.
  5. Start identifying individual franchise companies. Select companies that will have territories available in your desired area.
  6. Request preliminary information from franchisors. After selecting a few companies that match with you, contact the companies and request basic franchise information. Review the preliminary information to determine if the company still appears to meet your criteria and is worth spending more time on.
  7. Study the FDD. The franchisor will typically provide you with its Franchisor Disclosure Document (FDD), an FTC-mandated disclosure document. The FDD contains extensive information about the franchise, including the history of the executives, any litigation the company has experienced, the names and contact information for the current franchisees, and a copy of the franchise contract.
  8. Call existing franchises. This is a good tool for evaluating how well a franchisor supports its franchisees.
  9. Visit the franchisor. It's a vital check-and-balance to make sure you are completely comfortable and confident in the company you are about to enter into business with.
Make your decision. Be sure that this franchise opportunity does all of the following: matches your financial resources; provides you with the lifestyle you imagined; uses your particular skills and experience; provides a recession-resistant product or service; has a majority of happy and successful franchisees; and employs an experienced and enthusiastic staff of personnel.

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