If you've done any research on franchise opportunities, you've surely discovered that there is an overwhelming number of franchised businesses available. According to a recent article in Franchising World magazine, by 2006, franchising in the United States had expanded to more than 3,000 franchise concepts in 230-plus industry sectors. For someone interested in purchasing a franchise, that's a lot of ground to cover!

What you need are some simple tests to apply in your research, so you can quickly eliminate those companies that aren't a fit for you. By simplifying the initial research process, you'll have more time (and enthusiasm!) for those companies that may be potential winners.

Here are the ABCs of franchise research.

A.    Your goals. The most important step is to set your goals for franchise ownership. After all, if you don't know where you're going, how will you know when you've arrived? Ask yourself what sort of characteristics you'd like your business to have. Do you want to manage many employees or just a few? Are you passionate about business-to-business sales or would you prefer a retail location where customers come to you? Do you intend to keep your current job while the business starts or do you want to be a hands-on business owner? Carefully consider all you expect from business ownership and make a list of these goals. They will help you quickly determine if any franchise you look at is worth the time to complete a thorough investigation.

Once you have determined your goals, there are a few other key tests that you can quickly use to make sure you're looking at a franchise that might be a good match for you. You'll need to contact the franchisor and ask to see its Franchise Disclosure Document (FDD) to complete the next series of tests.

B.    Investment requirements.  Examine the amount of net worth and liquidity that is required by the franchise. There's no sense in spending lots of time investigating a franchise that you can't afford.  While there may be some leeway in these numbers, no good franchisor will want a franchisee to start a business deeply in debt. So consider these numbers and eliminate any company that requires more than you can manage.

C.    Territory limitations.  Ask the franchisor if there are viable territory options available within the area that you are interested in locating a business.  If not, move on.

D.    Litigation.  Item 3 in the FDD requires the franchisor to disclose all relevant litigation history. Reviewing and questioning the information in this section can allow you to quickly form an opinion about the relationship values of the franchisor. If there are a number of unhappy former franchisees, you can pretty well assume the franchisor has some problems to fix before you would consider the business for yourself.

E.    Failure rates. Item 20 in the FDD requires the franchisor to disclose all relevant data concerning unit failures and turnover rates at specific locations.  If the track record doesn’t look strong enough to you, there is no reason to proceed.

F.     Required skill sets.  If you get past the factors listed above, ask the franchisor to give you a list of the characteristics and skills they consider essential for a franchisee to be successful in their system.  If these don’t match your skills or if they are inconsistent with your goals for a business, head for the door.

Once you have made it past these first six steps with one or more businesses, you can dig more deeply into each franchise. Don't even consider skipping this next step—it is the most important test your new business will have to "pass" before you can be sure you know everything possible about a potential franchise purchase.

G.    Existing franchisees. Get on the phone and call a number of the existing franchisees; you'll find their contact information in the FDD. Find out how they feel about their businesses and also about the support they've received from the franchisor. Spend the time it takes to get a sense of the system from their perspective. Keep a record of their responses to your questions. If you find an overwhelming consistency in their input, it is a great indicator of how you would end up feeling if you become a franchisee in this system.

There! You've put your list of potential franchise companies through six quick tests and one much longer but extremely important test. If you've found some franchise businesses that made it through this testing process, you can be sure that they are likely to have the right stuff to make you a happy and successful franchisee. What's left? Talk to the franchisor’s development people, make a visit to their corporate headquarters, and then … ta da … make your decision!