THE MOST PROFITABLE FRANCHISE TO BUY
The most profitable franchise to buy can be found by evaluating the Franchise Disclosure Document, Bankability (SBA Approved Financing), Proven Business Model, Training, and Scalability of the franchise being evaluated. Rank a franchise among their peers and only consider the best of the best. Conduct interviews with key franchise executives to determine to confirm your research findings. Also, interview franchisees of “going” franchises to get real-world experiences and look for red flags. Use resources like The Business Reference Guide by Tom West of Business Brokerage Press, considered the most authoritative source of industry-specific business information.
Franchise Disclosure Document (FDD)
The Franchise Disclosure Document is a legal document that is available to the prospective buyer of a franchise in the pre-sale disclosure process. The FDD contains all of the information that state and federal franchise regulators consider relevant to a franchise investment, and it is the holy grail in researching a franchise. Information in the FDD ranges from the franchisor’s history and the business experience of its executives to the fees that the company charges, to the requirements for purchasing inventory, to the form of the franchise agreement, to three years of the franchisor’s financial statements. We pay special attention to Item 19 as it is a critical part of every franchise disclosure document. It provides a clear avenue for delivering performance information and must meet or exceed performance by its peers. Item 20 also gets extra scrutiny in our rankings to get the number of franchises and if they increase or decrease. Item 20 also contains contact information for current franchisees that we use to contact franchisees as part of our research.
Bankability (SBA Approved Financing)
For a franchise to make our Top 10 Franchise List, the franchise must qualify for the SBA Express Loan Program, which offers streamlined and expedited loan procedures for borrowers. The SBA Express Loan gives small business borrowers an accelerated turnaround time for SBA review; a response to an application will be given within 24 hours.
Proven Business Model
We use Item #20 of the Franchise Disclosure Document, The BRG Business Reference Guide, and other sources to validate the business model for growth and sustainability. Growth has to exceed the growth of the economy as measured by Gross Domestic Product (GDP)
Training
Strong training and support should be included in your consideration. Use franchisees’ input to review systems that support the owners. Review what the franchises offer in software, computer systems, group coaching, classroom training, mentorships, etc., and determine if they meet your needs.
Scalability
Verify that the Business Model has the potential to be scalable. We define scalability as the franchise’s ability to grow in profitability so that the owner can remove themselves from day-to-day operations. After the business has achieved scale, the owner can use the business to support their lifestyle or choose to grow to the next level.
Qualified franchisees can get SBA Express Loans in less than 24 hours. Investing in a franchise business is one of the safest ways to go if you’re thinking of buying a small business. A franchise has the business model, training, and systems to give you the best chance for success. You should also consider franchise resales because they already have customers and financial history.