KEY TIPS FOR LAUNCHING A SUCCESSFUL RESTAURANT

Posted on December 1, 2021December 3, 2021 by Franchise Strategist

Key Tips For Launching A Successful Restaurant.
BY Gary Occhiogrosso Contributor

For many people, opening a restaurant is a dream. One of the many things I find so interesting about the restaurant business is the blend of creative artistry and the detailed and challenging business aspects necessary to be successful. As an Adjunct Instructor at NYU’s School of Professional Studies, I teach restaurant concept development and business planning. On several occasions, I have been asked by my students to summarize the top issues that one must consider when planning to open a restaurant. Generally, regardless of the type of restaurant, the planning and considerations are the same. I’ll cover a few of the top line elements here.

At the beginning of the process, you should write a simple business plan. It would help if you thought about the many pieces of the puzzle connected to a successful outcome. Many novice restaurateurs, very often chefs, only consider the food component, but there is so much more. A well thought out business plan will include creating a unique concept, a competitive analysis, site selection, financial projections, equipment needs, staffing, and of course, the menu.

Let’s start with a concept

It’s essential that your restaurant offers a unique experience. It could be a Wine Bar with small plates, or a BBQ theme or a Create Your Plate concept. Whatever you decide, it is critical that the environment and “vibe” within the restaurant places the guest firmly inside the experience you’re attempting to create. Don’t confuse the guest with a concept that’s disconnected. As I often remind my clients, “everything touches everything else.” For instance, you wouldn’t use elegant tableware in a fried chicken restaurant or disposable plates in an upscale steakhouse. As obvious as this may seem on the broader elements, it’s essential to take that idea to every detail of the restaurant concept, no matter how small. Everything from the paint color to the music to the tabletops to the wall hanging must work together. The decor elements, the menu, and the service level need to provide the guests with a seamless experience that, when done well, goes almost unnoticed because it’s natural and authentic.

If You Build It, Will They Come?

Building a clientele is never as easy as hanging a sign over the door. It takes smart planning, execution of marketing, and living up to the promise in your mission and brand position statement. You should never assume, “if you build it, they will come.” Questions to ask yourself are; how will my restaurant connect with people? Why does my restaurant exist? What type of people am I looking to attract? What do they read or watch? How do they spend their spare time? What is the best way to reach them? Your concept should appeal to a particular, selected audience. There is no such thing as “everyone is my customer.” Knowing why and for whom your restaurant exists is crucial to success. Your marketing plan should offer compelling reasons why that guest base should frequent your establishment regularly. Is the concept created for health-conscious people? Is it aimed at Millennials or Baby Boomers? It is a full menu or dessert brand or a convenient, fast food, value-based concept. Your social media, print ads, and community outreach should focus on one single audience with one single message. Once you’ve built a loyal base of customers and repeat business, then you should consider expanding your base by marketing to others in the area with a proposition that appeals to them.

Your People Plan is Key

A great team will help you win everyday. Hiring great people is the first step in delivering service excellence and a consistent product to your guests. Your mission statement “the why” along with a corporate culture that emphasizes respect for employees, commitment to your guests, service to the community, and concern for the environment will guide you when selecting your staff. It’s not enough to hire people with restaurant experience; they should also understand and be excited about the mission of the restaurant. If not, they will go through the motions with an inauthentic approach and often fail at exceeding guest expectations. Examine your corporate core values and hire people that match it. Next, supply your staff with comprehensive, ongoing training and the proper tools so can they carry out the day to day tasks flawlessly. Hire for qualities, train for skills.

The Market and Competition

Understanding the market area where you’d like to open your restaurant is a crucial element to the plan. Carefully research the demographics to ensure there are enough people in the area that match whom you believe will embrace your concept. When looking for your location, work with an experienced commercial broker that can supply you with data to help you choose the area and the site correctly.

A full competitive analysis is also essential. For example, check the pricing of your competition. Be sure you’re not over or underpriced for the market. Check other services they offer, such as delivery and online ordering. Spend time in the market area, dine several times at as many competitors as possible, and position your restaurant to address the missing needs in the market. Having a unique value and selling proposition will keep you ahead of the game. Remember, everyone is vying for the same consumer dollars, so you need to create points of differentiation that will help your establishment stand out from the competition.

Consistently Great Food

Your menu must not only be relevant to the concept and the market but should be prepared and served perfectly every time. Restaurant guests expect dishes they grown to love to have the same flavor and high quality each time they visit. Inconsistent products can lead to disappointed guests, bad reviews, and slumping business. Your menu should be not only delicious but also simple to execute. The more straightforward the menu, the less chance of mistakes in preparation. Consistency increases guest satisfaction. Some chefs and “foodies” create menu items that are too complicated and require a highly skilled professional in the kitchen. This approach is fine if you intend to open a high-end restaurant staffed with high price personnel, but not in a fast-casual or family restaurant setting. A winning menu is simple, fresh, relevant, and great tasting. A competent chef can assist in developing dishes that are unique and great tasting that are also simple to produce with less skilled labor. If you have aspirations of owning more than one location, then simple execution, and consistent products are a must to achieve the goal of operating multiple restaurants.

Cash Is King

There are many reasons why restaurants fold. It could be the wrong concept, poor choice of location, not correctly researching the competition, poor service, an uninspiring menu, or bad food, to name a few. That said, the negative impact of undercapitalization may be the most frequent cause of restaurant failures. Knowing how much money you need to launch the restaurant is only the tip of the iceberg. You must assess ongoing cash needs while the restaurant is newly opened and gaining momentum. It may take many months for a restaurant to break even and then eventually become profitable. Being able to support the financial needs during this phase is often the “make or break” challenge that many new restaurateurs cannot overcome. A well thought out projection model that you create with the help of a professional financial advisor can save you from the frustration, negative financial impact and heartbreak of a failed restaurant. Considering capital needs for the first twelve to fifteen months is not only prudent but essential to the success of any new restaurant. You must be prepared to cover the operational costs and expenses as the restaurant “ramps up.” Carefully consider your cash needs and how much working capital you must have on hand, ready to deploy.

Have A Plan And Follow Your Dream

Owning a restaurant can be personally rewarding and profitable. Many people have built great restaurant companies following these simple guidelines. Desire and passion will only get you so far. Create your business plan as a road map. Your plan will help you stay on track when dealing with the many moving parts of launching and successfully operating a new restaurant.
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About the author:
Gary Occhiogrosso is the Founder of Franchise Growth Solutions, which is a co-operative based franchise development and sales firm. Their “Coach, Mentor & Grow Program” focuses on helping Franchisors with their franchise development, strategic planning, advertising, selling franchises and guiding franchisors in raising growth capital. Gary started his career in franchising as a franchisee of Dunkin Donuts before launching the Ranch *1 Franchise program with its founders. He is the former President of TRUFOODS, LLC a multi brand franchisor and former COO of Desert Moon Fresh Mexican Grille. He advises several emerging and growth brands in the franchise industry. Gary was selected as “Top 25 Fast Casual Restaurant Executive in the USA” by Fast Casual Magazine and named “Top 50 CXO’s” by SmartCEO Magazine. In addition Gary is an adjunct instructor at New York University on the topics of Restaurant Concept & Business Development as well Entrepreneurship. He has published numerous articles on the topics of Franchising, Entrepreneurship, Sales and Marketing. He was also the host of the “Small Business & Franchise Show” broadcast in New York City and the founder of FranchiseMoneyMaker.com

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LEARN MORE ABOUT STARTING YOUR RESTAURANT: www.frangrow.com www.frangrow.com

8 Key Costs To Consider When Opening A Restaurant

Posted on September 1, 2021September 3, 2021 by Franchise Strategist

8 Key Costs To Consider When Opening A Restaurant
By Gary Occhiogrosso – Managing Partner – Franchise Growth Solutions

Two of the most frequent questions I’m asked at a seminar, workshop, or when teaching a restaurant development course at New York University are; “how much money do I need to open a restaurant, and how do I get the money?” This is the first installment of a two part article answering those questions.

Before we can address how to fund your restaurant, we need first to understand what we’re building and its cost. The type of restaurant you’re opening will determine the amount of money you need. In addition, the kind of restaurant will affect the type of funding and who may have an interest in investing or supplying a loan. Additionally, you’ll need to evaluate how much of your own money you need to provide. That’s because part of the process necessary to convince an investor, banker, or private lender is that you’re genuinely committed to the project. You know the expression, “put your money where your mouth is”

For the sake of this discussion, let’s say you’re opening a fast-casual restaurant. Not a franchise but an independent concept that you have developed on your own. This type of project may require a conventional business loan or an SBA loan. In many cases, investors other than family and friends may not be interested in investing in a brand new concept with no track record of success. It becomes further complicated if this is your first foray into the restaurant industry.

Fast-casual restaurants typically cost between $250,000 and $400,000 to “turn the key” and open the doors for business. The various costs associated with opening a restaurant will range depending on factors such as location, size and condition of the space, everything from security deposits to the reserve capital you’ll need to carry possible shortfalls the first few months you’re open.

Investment Costs to Consider

* Professional fees: This is usually necessary to set up your business entity, whether a corporation or LLC. Also, you’ll want to have a lawyer review any lease you may sign to rent a space where you will construct your new restaurant.
* Security deposits: This may be one to three months of rent paid to your landlord. In addition, many utility companies require deposits to set up electric, water, and Internet connections.
* Equipment: The cost for all of your kitchen equipment. Items include hoods, grills, ovens, stoves, stainless steel prep tables, shelving, hot tables, cold tables, a Point of Sale (POS) system, and a walk-in refrigerator. In addition, small wares, things like scoops, ladles, fry baskets, flatware, dishes, glasses, and other small items you need to prepare your menu and serve your guests. Now let’s move to the front of the house. Additionally, you’ll be looking at furniture and fixtures, countertops, workstations, tables, chairs, decorative shelving, and other items. These are the items you use in the front of the house to create the environment that will best suit the concept you’ve created.
* Leasehold improvements: In most cases, this will be your most significant expense. Leasehold improvements are generally construction costs for electrical installations, hood venting, plumbing, heating, and air-conditioning. These items are referred to as “the mechanicals.” And let’s not forget building one and, in many cases, two ADA-compliant bathrooms. Also, installing the proper ceiling, flooring, millwork, painting walls, and other elements that we typically think of as construction. On a side note, you can take advantage of opportunities due to the abundance of restaurants that have closed during the pandemic. These empty restaurant spaces are referred to as “second-generation restaurant spaces.” You can save thousands of dollars if you find and secure a space that was formerly a restaurant. In many cases, you will find the mechanicals have remained in the building. These second-generation restaurant spaces help to reduces your cost if you don’t need to install a hood, venting, plumbing, electrical, and restrooms.
* Signage: Properly identifying your restaurant will mean you will need to sign for your storefront. Also, consider that you may need lighted signs in the windows and other signage throughout the restaurant.
* Start-up inventory: This is probably the most extensive inventory order you’ll ever place. This initial order is for food, paper, beverages, and other supplies you’ll need in your restaurant daily. You’ll replace these inventory items as you use them, but when you first start, you’ll need to stock your restaurant from scratch with every single thing for the first time.
* Grand Opening Advertising: This is an item that most restaurateurs neglect. You’ll want to launch your restaurant by making a big splash in the neighborhood. To do this, you need the proper budget for social media, print, and other forms of advertising & marketing so you can get the word out.
* Reserve Capital: As I mentioned earlier, you will need to reserve cash in the bank. This reserve cash is required to meet shortfalls that may occur when you first open your new restaurant. You may not break even for months. Therefore, it would be wise to be prepared to cover payroll, inventory, utilities, and other costs incurred as you operate.

Understanding the actual cost of opening your restaurant is vital. An investor or bank will want to see that you’ve applied critical thinking to the project by taking time to evaluate the start-up cost honestly. In addition, you will need to prepare a business plan and projections to secure bank financing or satisfy an investor. Properly evaluating the required investment will lead to accurate budgeting these key startup costs.

So now that you have an understanding of cost, you should be prepared for a banker or investor to inquire how much of your own money you’re willing and able to invest into your business. In many cases, the SBA, private lenders, or conventional loans through a bank will require that you supply somewhere between 15% and 25% of the total amount necessary. As an example, if you project a cost of $400,000 to open your new restaurant, you will need between $80,000 and $120,000 in cash. Your cash investment demonstrates to the bank or investor that you have “skin in the game. “I have never seen a bank or investor finance a new restaurant 100%.
Now that we’ve covered the investment information necessary to open a new restaurant, we’ll tackle the second question in our next article. We’ll dig into funding methods such as a conventional business loan with a bank, an SBA loan, a private investor, and of course, family and friends.

About the Author:
Gary Occhiogrosso is the Founder of Franchise Growth Solutions, which is a co-operative based franchise development and sales firm. Their “Coach, Mentor & Grow Program” focuses on helping Franchisors with their franchise development, strategic planning, advertising, selling franchises and guiding franchisors in raising growth capital. Gary started his career in franchising as a franchisee of Dunkin Donuts before launching the Ranch *1 Franchise program with it’s founders. He is the former President of TRUFOODS, LLC a multi brand franchisor and former COO of Desert Moon Fresh Mexican Grille. He advises several emerging and growth brands in the franchise industry. Gary was selected as “Top 25 Fast Casual Restaurant Executive in the USA” by Fast Casual Magazine and named “Top 50 CXO’s” by SmartCEO Magazine. In addition Gary is an adjunct instructor at New York University on the topics of Restaurant Concept & Business Development as well Entrepreneurship. He has published numerous articles on the topics of Franchising, Entrepreneurship, Sales and Marketing. He was also the host of the “Small Business & Franchise Show” broadcast in New York City and the founder of FranchiseMoneyMaker.com
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FRANCHISE YOUR BUSINESS TODAY: www.franchisegrowthsolutions.com

If you own a business, you’ve only got days left to apply for a Paycheck Protection loan

Posted on March 5, 2021March 5, 2021 by Franchise Strategist

If you own a business, you’ve only got days left to apply for a Paycheck Protection loan

(BPT) – by Jennifer Roberts, CEO, Chase Business Banking and Sean ‘Diddy’ Combs, Founder, Our Fair Share, entrepreneur and media mogul

In just four months last year, more than 5 million U.S. businesses received a Paycheck Protection Program (PPP) loan. That helped them pay their workers, their mortgage or rent, and their utility bills. Unfortunately, many small businesses owned by minorities, women and veterans didn’t get PPP loans last year. We want to make sure you know how to apply for the funding your business really needs.

But you need to act quickly. PPP ends March 31, but many lenders may stop accepting applications sooner so they have time to process. That means you need to get started on an application quickly for PPP funds to help with your payroll costs and other bills, to get your fair share. The Small Business Administration (SBA) and participating lenders are working hard to make these loans available to more businesses in low- and moderate-income communities. And to smaller businesses, like barbershops, restaurants, nail salons, clothing brands, bars, bodegas and independent contractors.

Here are eight facts you should know about PPP that may encourage you to apply:

1) Congress funded it with $284 billion for 2021. That’s enough for millions of more loans.

2) It’s for first-time borrowers. The SBA has already approved more than 704,000 loans for borrowers who didn’t get one last year. The SBA also has approved loans for second-time borrowers.

3) A PPP loan may be forgiven. Up to 100% of your loan could be forgiven if you qualify and meet the SBA’s requirements. That means you wouldn’t have to pay back the forgiven amount.

4) Businesses with few employees get special attention. Through March 9, the SBA is accepting applications only from businesses with fewer than 20 employees.

5) Most loans are relatively small. The average loan to first-time PPP borrowers this year is $22,000, the SBA says.

6) Smaller businesses are getting approved. 90% of Chase’s approved PPP loans in 2021 are to businesses with fewer than 20 employees.

7) Help is available to understand PPP. chase.com/ppp has a webinar, checklists and FAQs to walk you through the application process. You can also check out sba.gov/ppp.

8) It’s easy to find participating lenders. The SBA’s website — sba.gov/funding-programs/loans/lender-match — has a “Lender Match” link to help you connect to a lender near you.

The 2021 PPP is scheduled to expire March 31, but to get your application to the SBA by then, you need to act now. If you believe you are eligible, we urge you to find a lender, prepare your information and apply.

Get started now. Don’t miss out!

To learn more, or to access helpful tools and resources, please visit chase.com/ppp or ourfairshare.com.

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Tips On Raising Capital to Expand Through a Private Placement

Posted on August 27, 2020December 10, 2020 by Franchise Strategist

Today’s article by our friends at the Law Office of Spadea Lignana touches on some of the tips to know when attempting to rise money through Private Equity Placement. Tom Spadea and his staff well versed and fully equipped to advise and guide you through the process. Franchise Growth Solutions assists in the process by working with brands seeking to expand their business.

Raising Capital to Expand Through a Private Placement Raising Capital to Expand Through a Private Placement
By Staff Writer at Spadea-Lignana Law Office

Even a Deal with Friends and Family Needs Proper Documentation
If you are an entrepreneur looking to raise capital by selling shares of your company to an individual that won’t be an active partner in your business, you have to be sure you are compliant with federal and state securities laws. If you are selling a portion of your company to an investor, you are subject to securities regulations. That is, UNLESS you fall under an exemption and you properly document, and in some cases, file for an exemption. This is a trap for many unwary entrepreneurs, who think they don’t have to worry about formal documentation of their deal because they are just offering shares of their company to a few friends and family.

While the offering they are contemplating may very well qualify for an exemption, if they don’t follow the laws and regulations by drafting a formal private placement memorandum (PPM) and complying with certain filing requirements, they run the risk of personal liability. This liability could include accusations of fraud and potential civil and criminal penalties for failure to properly register securities with federal and state agencies.

Drafting the PPM
The rules and regulations are designed to avoid Ponzi schemes and other fraudulent investing activities by making the transaction transparent and well documented. The creation of a PPM is not as difficult as many law firms and pundits may make it sound. We are not talking about an initial public offering with a six figure legal cost. Our experienced securities lawyers can walk you through the process and help you evaluate your project as suitable for a PPM. In many instances we can give you a flat fee project cost for documenting your deal. We have drafted PPMs ranging in size from a startup, fast casual restaurant to a multi-million-dollar alternative energy project.

Minimizing Personal Risk
Raising equity capital from outsiders is typically done to avoid personal debt, risk and liabilities while sharing the upside with those equity investors. If the deal is not properly documented, you are potentially erasing all of those protections and neutralizing the purpose of raising private money in the first place. Put another way, a poorly documented deal leaves the entrepreneur with all of the downside risk personally, with a portion of the upside sold off to investors. That is not a good business deal.

Seek Professional Guidance
Let us help you understand the cost, time and effort that it will take to draft a private placement memorandum for your deal. Call us at 215-774-3331 for more information. Visit https://www.spadealaw.com/

Pandemic Spurs Innovation for Small- to Mid-Sized Businesses

Posted on July 1, 2020July 21, 2020 by Franchise Strategist

Set up your business in the right entity and state. Mistakes in formation or taxation can have a lasting negative impact on business growth and viability. Before starting a new business, consider the best structure for asset protection and tax minimization. For example, a limited liability company (LLC) gives business owners time to operate at a loss for the first few months and write off the loss on their individual 1040 forms against other forms of income.

Pandemic spurs innovation for small- to mid-sized businesses

By Brandpoint

(BPT) – As COVID-19 continues to disrupt normal day-to-day operations of small- to mid-sized businesses and nearly half of the U.S. workforce hangs in the balance, employers are taking creative measures to reset their go-to-market strategies and offerings. By changing their operations to meet the demands of their customers, businesses can not only stay relevant but keep their staff employed and thrive in the new economy.

This pandemic offers business owners, investors and solopreneurs the opportunity to take a critical look at their overall business model, offerings and operations and reset the entire business structure, creating new opportunities to serve and prevail. This is the perfect time to explore new legal solutions to the most common business obstacles to help companies preserve and protect their brands and prosper for generations to come. There are great examples of resets happening within many industries.

With the pandemic closing summer camps throughout the country, ACA-accredited Adventure Links, a 23-year-old summer camp in Virginia, has found a way to replace its usual summer adventure camp programs with

The CampCloud(TM) , an experiential online alternative. The company is now offering its virtual camping programs to individuals and employers to assist employees working from home by keeping their kids engaged, learning and delighted all day from virtually anywhere. The program is being offered to other camps as a customizable, online option for their campers.

Ensuring the health and safety of employers when stay-at-home orders are lifted, and business resumes, is critical. Thanks to a team of entrepreneurs, Disinfect & Shield(TM), an FDA-registered, EPA-approved and eco-friendly disinfectant used in surgical suites for the last decade, is now available to businesses worldwide to kill SARS-CoV-2, the virus that causes COVID-19 and other dangerous organisms. It works by creating a permanent anti-microbial shield, preventing the virus from attaching to surfaces where it has been applied without risk to humans, animals or crops. With Disinfect & Shield(TM), employees, customers and visitors can feel safe knowing that their space has been properly disinfected and treated for optimum health and safety.

Clint Coons, founder of Anderson Business Advisors, offers 5 financing and entity creation tips to help entrepreneurs and small business owners:

Know how to use loans: CARES Act loans have specific guidelines like having to use at least 60% of the loan within 24 weeks of receipt for payroll expenses. Concerned that money would dry up, many small business owners applied with no way of utilizing them because their business cannot reopen under the strict guidelines imposed on the industry.
Alternate cash sources: Borrow from a 401(k) or IRA to keep businesses afloat, as it does not need to be paid back for at least 3-6 years. However, pulling money out of a retirement plan comes with some risk, such as if the business does not see profitability, then retirement funds were wasted on a failed business venture.
Beware of increasing liabilities: Because insurance will not cover claims brought under COVID, reopening comes with risk and business owners are wondering how they will operate under strict COVID-19 related guidelines and still make a profit. Now is the time to pivot and reset.
Consider restructuring: Set up your business in the right entity and state. Mistakes in formation or taxation can have a lasting negative impact on business growth and viability. Before starting a new business, consider the best structure for asset protection and tax minimization. For example, a limited liability company (LLC) gives business owners time to operate at a loss for the first few months and write off the loss on their individual 1040 forms against other forms of income. There are different entity funding options with protection ramifications.
Utilize Privacy Shield Protection by creating anonymity with trusts.

COVID-19 has shown that many businesses aren’t prepared for worst-case scenarios and make common mistakes that can affect their ability to grow and borrow money. If approached strategically, small- to medium-sized businesses can take this time to implement changes and help their operations succeed and thrive.

How Do I Get The Money to Start My Own Business and How Much Money Do I Need.

Posted on May 19, 2019January 16, 2020 by Franchise Strategist

HOW TO FINANCE YOUR BUSINESS IDEA…Our friends at Benetrends have covered this topic perfectly. When you have a great idea for a business but not the cash to get it going. This article will offer helpful tools to get that business started and growing.
Photo by Mick Haupt on Unsplash

Entrepreneurial Dilemma: Do I Have Enough Money to Start My Own Business?
Author Benetrends

You have come up with a great idea for your own business, one that you are confident will be financially, personally, and professionally fulfilling. You are ready to start developing your business plan, doing market research, and testing marketing ideas.
How much money will you need to bring this idea to fruition? What kind of finances will you need to get things started and how much will you need on a monthly basis going forward?

CLICK HERE NOW: Franchise your company, expand your brand, collect your royalties!

These financial questions are often ones that keep entrepreneurs up at night, worrying about how much money they will need to be viable and successful.

It is a classic entrepreneurial dilemma: do I have enough money to start my own business?

Fortunately, most up-front and ongoing costs can be identified at the start of your ideation. Doing the work to build out your budget will bring you peace of mind and a foundation to use when pursuing small business funding. Here is a closer look at the framework you should use to determine your business costs.

What will it cost to open your business? Find out with our business planning calculator.Twitter Tweet This
Why Knowing Startup Costs Is Important

Startup costs give you and others a clear idea of what it will take to operate your business. Too many small-business owners underestimate their costs and end up playing catch up, undermining their growth or forcing them out of business. There are several benefits to projecting these costs:

Profit Analysis. Knowing what your costs are, along with your revenue projections, helps you estimate your profitability, including when you are likely to break even and how long you may be operating at a deficit.
Investor Expectations. If you are seeking investments to help finance your business, investors will want to see your startup cost analysis.
Loan Approvals. Lending officers, like investors, will want to know what it takes to open the doors and keep them open when considering your loan application.
Tax Planning. Anticipating your business costs helps you and your accountant plan your tax strategy by understanding what will be deductible when it comes time to file your taxes.
Peace of Mind. There is stress in starting a business. A clear-eyed understanding of your costs eliminates one uncertainty in the process.

Click Here to Learn about Franchising Your Business

Questions to Answer Before Building Your Cost Estimate…Read the entire article here:
https://content.benetrends.com/blog/entrepreneurial-dilemma-do-i-have-enough-money-to-start-my-own-business

6 Tips When Buying A Franchise

Posted on January 12, 2019February 8, 2019 by Franchise Strategist

Starting a business can be a life-altering event both good and sometimes not so good. One of the ways people reduce their risk is to purchase an established brand with a proven business model – a franchise.

Franchising has proved over and over again to give a new business owner the highest probability of success. If you follow the system, choose an experienced franchisor, work diligently, are appropriately funded and understand what you’re getting into then operating a franchise may be a perfect business model for you.

Selecting a franchise and purchasing a franchise combines gut reaction with solid research. Although there are many steps to buying a franchise here are my Top 6 Tips that will keep you moving forward in the process. I recommend never skipping or overlooking any of them.

Tip #1 – Begin With Some Soul Searching
Make a written list of what you believe you’re looking for in a business opportunity. However, for this exercise, you cannot put the words “make money” on your written list. The reason for that is simple. I want you to look inward at your dreams, background, hobbies, likes, dislikes, skills, social and community positions and all the elements that a business would need to deliver to you, despite the money. I know many franchisees and entrepreneurs that dread getting up every day to work their business even though are making all sorts of money. Franchisees that are great at selling or corporate engagement should seek a franchise that puts them in front of customers in a corporate environment, perhaps in the advertising business or financial business. Entrepreneurs that like to craft things or work outside or work with their hands should never seek out opportunities that land them behind a desk or stuck in a shop 12 hours a day. Although ultimately in time you will not be doing the “work of business” keep in mind that in the startup phase you may need to. Moreover, if you don’t like the work or have neither the time, desire or inclination to develop new skills you may never get to the next level in developing your business. If you can’t “see yourself” doing a particular type of work, then walk away, no matter how much money you think you’ll make. Look in the mirror and be honest when you sit down to write your list.

Tip #2 – How Much Available Capital Do I have?
Numerous business reports cite the number one reason a small business fails is that proper thought and consideration wasn’t given to the appropriate capital required to open and sustain the start-up of a small business. A lack of adequate money can destroy you before you even begin. It is crucial that you understand the numbers. Before you start your quest for a franchise, you should access your available liquid capital, your borrowing ability and the net worth necessary to collateralize a business loan. Also, there are various ways to finance your new business. That includes your savings, investments or loans from friends and family, bank loans, SBA loans and using the funds in your 401K to finance the new venture. Once you know the number, you can go shopping, or you may decide you don’t have enough money now and need to create a plan to accumulate the appropriate amount of start-up capital. Your accountant may be able to help you access your investment ability. Keep in mind many accountants (and lawyers) are not entrepreneurial minded or risk takers. Some will attempt to “protect you” by trying to convince you not to go into business. Remember you’re assessing your investing capability not looking for permission. That said, knowing how much you can invest will save you and the franchisor time. In addition, it’ll place you in a better position to succeed.

Tip #3 – Meet The “Parents”
In this case, the Franchisor. Once you’ve selected the type of industry you’d like to be in, its’ now time to search for a company that meets the criteria on the list we discussed earlier in this article. There are many ways to seek out opportunities, Franchise Trade Shows, Websites, Franchise Business Brokers and others. I’ll cover that in a subsequent article. Once you reach out to a franchisor, a franchise sales representative will most likely contact you. At this point be prepared to answer some questions over the phone. You may also be asked to fill out an application before going any further in the process. Many reputable franchisors will not engage in any serious conversation with a candidate without an application. My experience has been that franchisors willing to forgo written applications or skip asking qualifying questions at the start of the process may be desperate to “sell” a franchise. That should be a red flag for you. Beware, because it may be a sign the franchisor is undercapitalized and/or more interested in selling franchises and collecting licensing fees instead of supporting the franchisees long term by focusing on royalties from successful franchised locations.

Tip #4 – Take A Good Hard Look At All The Documentation
Once you fill out the application, the franchisor will most likely interview you over the phone or in person and then is required to issue you a Franchise Disclosure Document (FDD). Depending on the State where you live, you must have the FDD between 10 and 14 days before you can enter into any agreement or hand over any money to the franchisor. You will be asked to sign a receipt that you received the FDD and indicate the date you received it. This disclosure document has all the required information that the Federal Trade Commission (FTC) and various States require the franchisor to tell you. Please read it and reread it. Have a franchise attorney review the document and offer legal counsel regarding the franchise agreement. Then follow up with the franchisor. I would recommend that if you’re interested in moving forward, it’s now time to meet the franchisor in person (if you haven’t already) by scheduling a Discovery Day. Make a list of questions and spend the day to meet the team and get answers as well as a feel for the culture of the organization. Find out how deep the franchisor’s organization is and, please make sure you feel comfortable that the franchisor has enough experienced staff to service the franchisees.

Tip #5 – Speak With The Franchisees
Your best source of information is going to come from the franchisors customers, that means the franchisees. Call and visit as many franchisees as possible. Since many Franchisors don’t disclose Average Unit Sales and Operating Expenses in their FDD, they can not discuss it with you. Franchisors can only make claims and address financial issues published in their FDD. Be wary of the sales rep that starts telling you how much money the franchisees are making and how much money you can make. This practice of making “earning claims” not documented in the FDD is not only a violation of franchise regulation but also another red flag. However franchisees are not bound by franchise regulation and if they choose, are free to answer any question as long as they do not disclose proprietary information belonging to the franchisor, such as recipes or processes. When visiting the franchisees, build a report, let them know you’re close to making a decision and carefully phrase your questions so that they are not intrusive. I always ask about support and if they had the opportunity to “do it all over again” would they? Keep in mind there will always be a few disgruntled or struggling franchisees. Without knowing all the facts, it’s tough to condemn the system or franchisor. That said, if the majority of franchisees regret their decision or feel that the franchisor is not supportive, then you need to make further inquiries with the franchisor before signing the franchise agreement.

Tip #6 – Ready, Set, Go
Not so fast. Before the franchisor prepares a franchise agreement is it essential to discuss the best way to structure your new company. Many attornies will recommend that you not sign the franchise agreement in your name but instead set up a separate business entity such as a Limited Liability Company (LLC) or an S-Corp. Seek competent legal advice from a franchise attorney before you sign a franchise agreement or set up a new company.

Franchise ownership can provide you and your family a lifestyle that can not be achieved by working a job for a company. Building a business can be rewarding, exciting and stressful all at the same time. As an entrepreneur, I believe business ownership is the best form of work for many people.

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About the Author
Gary Occhiogrosso is the Founder of Franchise Growth Solutions, which is a co-operative based franchise development and sales firm. Their “Coach, Mentor & Grow Program” focuses on helping Franchisors with their franchise development, strategic planning, advertising, selling franchises and guiding franchisors in raising growth capital. Gary started his career in franchising as a franchisee of Dunkin Donuts before launching the Ranch *1 Franchise program with its founders. He is the former President of TRUFOODS, LLC a multi-brand franchisor and former COO of Desert Moon Fresh Mexican Grille. He advises several emerging and growth brands in the franchise industry. Gary was selected as “Top 25 Fast Casual Restaurant Executive in the USA” by Fast Casual Magazine and named “Top 50 CXO’s” by SmartCEO Magazine. In addition, Gary is an adjunct instructor at New York University on the topics of Restaurant Concept & Business Development as well Entrepreneurship. He has published numerous articles on the topics of Franchising, Entrepreneurship, Sales, and Marketing. He was also the host of the “Small Business & Franchise Show” broadcast over AM970 in New York City and the founder of FranchiseMoneyMaker.com