Franchising is the most successful small business model ever created. Advantages include proven, time-tested systems, Franchisor support, purchasing power, established vendor relationships, brand recognition, consumer trust, and more.

First, you must determine if the franchising business model is right for you. Here are your options:

There are over 4,000 franchises available in the US. How do you find the franchise system that’s right for you?

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1. Self-Funding: Use your own liquid capital.
2. Securities-Backed Funding: Securities-backed financing allows you to monetize your existing assets, so you enjoy greater flexibility. You can make investments and exploit market opportunities without selling your assets; these serve to secure your financing.
3. Conventional Loans: Conventional business loans are typically provided by banks, credit unions, and other financial institutions. They do not have an SBA guarantee, which makes these loans riskier for lenders. Startup franchises may not be able to obtain conventional loans.
4. HELOC: Home equity loans and home equity lines of credit, or HELOCs, let you tap your home equity for cash and use your property as collateral. A home equity loan provides a lump sum upfront, and a HELOC offers a revolving line of credit that you can access as needed, like a credit card. You can use this money to finance a franchise, but your home is at risk of foreclosure if you fall behind on loan payments.
5. SBA-Backed Funding: The U.S. Small Business Administration helps small businesses secure funding by setting loan guidelines and reducing lenders’ risk. These SBA-backed loans make it easier for small businesses to get the funding they need. SBA offers several products that commonly fund franchise investments, such as the SBA Express Loan, SBA 7(a), and SBA 504.
6. ROBS Funding: Rollovers as Business Startups (ROBS) are arrangements in the United States in which current or prospective business owners use their 401(k), IRA, or other retirement funds to pay for new business start-up costs, business acquisition costs, or to refinance an existing business.
7. Unsecured Funding: An unsecured business loan is a small-business lending option used when a business needs capital. For example, you may take out this type of loan to expand your business to a new location or hire additional staff. It can be used for other business expenses, such as working capital or equipment purchases. Unlike a secured loan, unsecured loans do not require any collateral from the borrower. This means that you can borrow a loan without risking any of your hard-earned business assets.
8. Equipment Leasing: Franchises that rely on costly equipment can use equipment leasing to fund a portion of their operating expenses. Restaurant franchisees may use equipment leasing, for example, because buying equipment upfront can be expensive. You’ll pay a monthly fee to use the equipment and may have the option to upgrade, purchase it, continue renting it, or return it at the end of the lease.
9. Franchisor Financing: Some Franchisors offer franchisees financing, in whole or in part. Just keep in mind that a franchise financing program isn’t your only option, and you should compare the Franchisor’s offer with other funding sources.
10. Friends and Family: When you’re trying to get a new venture started, friends and family funding is often the first place you turn to raise some capital. In essence, friends-and-family investors are a form of crowdfunding. You might take small amounts of money from several family members or close friends to raise a more significant overall sum. Friends and family investors may be willing to put money into your business venture on an interest-free basis. Alternatively, you might draw up a friends-and-family investment agreement that offers interest, an equity stake, or another form of reward for lending you the money you need.

The Franchise Disclosure Document (FDD) contains 23 uniform Items. All FDDs have the same Table of Contents, but the contents of the Items differ from franchise to franchise. Visit Entrepreneur.com for a description of all 23 Items. While all 23 Items are important for prospective franchise owners to understand, I’ve highlighted a few.

Questions for Franchisors

These questions are not intended to be fired off rapidly at the FranDev team. Rather, these are questions to ask over the course of your due diligence.

• What’s the experience of the leadership team?
• What’s the length and structure of the initial training program? In-person + virtual?
• How many franchise owners are currently operating?
• What is your client acquisition/marketing strategy?
• What’s the staffing model for a successful franchise owner? W-2s, 1099s?
• What’s the revenue split between residential/commercial jobs?
• Can this be run home-based, or is a retail/office/industrial/flex facility required?
• Who are your major competitors in the franchise space?
• What differentiates your brand from theirs?
• What’s the overall success rate in the system?
• What are you looking for in a franchise owner?
• Is your ownership model owner-operator, semi-involved/absentee, or full absentee/investor?
• What’s the day-to-day like if I’m an owner/operator? Semi-involved/absentee?
• How long will it take to break even?
• How much is the initial investment range in Item 7 of the FDD?
• Do you have an Item 19? If so, what are the highlights for earnings potential?
• Do you host an in-person or virtual Discovery Day for candidates to meet the executive team? If so, how often?

Questions for Franchise Owners

Franchisees are busy business owners. Put yourself in their shoes as a franchise owner/validator. If they take the time to speak with you about their business, be respectful of their time. Show up on time and be prepared with your questions. Thank them for speaking with you and send them a digital gift card via text/email to show your appreciation.

• When did you join the franchise?
• How was the training program?
• Are you satisfied with the level of support provided by the Franchisor?
• How often do you request support from the Franchisor?
• Do you feel satisfied with the level of service you receive in exchange for your royalties?
• What is the client acquisition model? What works? What doesn’t work?
• How long did it take to break even?
• How many territories do you operate in?
• In hindsight, what would you have done differently as a new owner?
• What is your biggest problem?
• Is the culture for owners to help other owners?
• Do you meet with a mastermind/peer-to-peer group monthly or quarterly?
• What are systemwide weekly sales targets per territory?
• What’s the net income expectation?

• Review your Franchise Agreement with a franchise attorney. Need a recommendation for a franchise attorney?
• Determine and form the entity for your new franchise and obtain an EIN.
• Assign roles and responsibilities for each member of your team.
• Make sure funding is secured.
• Sign the Franchise Agreement and pay franchise fees.
• Schedule training with Franchisor.
• Access Franchisor’s online training and support system.
• Use Franchisor’s project management software to prepare for launch.
• Join a peer/mastermind group of seasoned franchise owners to learn best practices.
• Launch your new franchise!