Franchising can be a very effective way to get into business, but it’s important to keep your eyes and ears wide open and ask lots of questions. The more you know about the franchise you are considering, the better your decision will be.

No two franchise systems are alike. Some franchise networks succeed more than others.

Some of you already have a fair amount of business experience and are merely seeking useful resources for your selection process.

Others of you, however, may find yourselves newcomers to the small business world and are eager not only for resources, but a plan to help you conduct your selection process.

This is the "homework" of buying a franchise. The more you learn about franchising and the franchise selection process, the more successful you will be at understanding what the franchisor is really offering you.

This article is not intended as a comprehensive survey of all resources available about selecting a franchise; rather it is intended to point you in the right direction and help get you started. Remember, you are considering investing your hard-earned money as well as your financial future and dreams in a new franchised business. The time and money you "invest" now, with in-depth research and investigation, together with legal and financial guidance from experienced professionals, may well save you many unpleasant and costly hours in future litigation and/or financial ruin.

Frequently, I hear people say they want to "save money" in their selection process by doing it themselves or using a friend or family member instead of using qualified counselors.

Failure to obtain experienced counsel - your own "success team" - can be "penny wise and pound foolish." Cutting corners in your franchise selection process is not a very good idea.

Given the level of your potential investment, including site acquisition, build-out, fees and commissions, make allowance for a reasonable budget for expert advice. Typically, a budget of 2%-5% of your total investment is sufficient to afford a competent "success team" to steer you through the selection process.

Building your success team won’t guarantee your success, but our experience shows it will save you from the "penny wise, pound foolish" trap.

Your team should include yourself, as an educated buyer of the franchise, along with an experienced franchise attorney who understands franchise agreements and can review your offering circular and assist you in the establishment of your business.

Last but not least, your team will need an experienced financial consultant or accountant who understands franchise business and can review your offering circular with a view to projecting the profit potential and risk of your opportunities, and can assist in setting up proper financial control systems.

Once you have selected your team, you are ready to start looking at specific franchise opportunities. Here is a criteria list that serves as a guide to help you select a franchise system worthy of your investment.

The American Association of Franchisees and Dealers (AAFD) has compiled a list of seven things to look for in a franchisor:

1. Select a franchising company that is primarily interested in distributing quality products and services to ultimate consumers. Although this rule may seem obvious, many (if not most) franchising companies are primarily interested in selling franchises and are less concerned with the quality of the products and services they are theoretically in business to sell.

2. Your franchising company should be dedicated to franchising as its primary mechanism of product and service distribution. Be wary of franchisors with a large number of company-owned stores, or one which distributes its products through other channels such as supermarkets or discount stores.

3. Your franchising company should produce and market quality goods and services for which there is an established market demand. The value of franchising emanates from the value of the franchisor. Too many prospective franchisees cannot qualify for a widely-recognized franchise and settle for a lesser known system, thinking the franchise concept is more important than the product and trade name.

4. Select a franchisor with a well accepted trademark.

5. Evaluate your franchisor’s business plan and marketing system. A well-established, well-designed marketing system promises substantial and complete training and overall franchisee support.

6. Your franchisor should have good relationships with its franchisees. Likewise, the franchisees should have a strong franchisee organization which has negotiating leverage with the franchising company.

A franchisor that does not permit its franchisees to organize is a sure sign of trouble ahead. Strong franchisee associations, on the other hand, will pave the way to successful and cooperative franchising systems.

7. Only deal with franchising companies that provide sales and earnings projections that demonstrate an attractive return on your investment.

Do not believe franchisors who claim they are forbidden by law to provide earnings projections and evidence of actual performance. To the contrary, all state and federal laws regulating franchising encourage franchisors to provide earnings claims to prospective franchisees.

Be sure to select a franchise that meets all seven of these criteria.

Franchising, when done right, can be a win-win-win relationship for all parties involved – the franchisor, the franchisee and the consumer. Owning a franchise can be a rewarding career path.

To truly identify which franchise is worthy of your investment, you need to talk to lots of franchisees, including ones the franchisor doesn’t recommend.

Include some in similar geographic areas, some who’ve been in business three to 12 months, and some who’ve been in the system for many years.

Identify the reasons why the franchisees you speak to are successful, including the length of time and amount of post-opening working capital they required to reach sustainable profitability, or how and why they failed.

Franchisees may be more willing to talk to you in person than on the phone or via email.

Consider the following franchise prospect’s “Bill of Rights” as developed by the AAFD: