Thinking of buying a franchise? You’re not alone. Franchising is often an excellent path to business ownership, but let’s get real—it’s also a big decision that ought to be well considered. With thousands of franchise possibilities out there, from gyms to quick service restaurants, how do you pick the one that’s right for you?
Why Getting This Choice Right Matters
Here’s the truth: the wrong franchise isn’t just a disappointment—it’s potentially financially devastating. I’ve seen too many people jump into franchise opportunities without doing their homework, only to struggle with a business model that doesn’t fit their skills, interests, or financial situation.
Conversely, the right franchise can be extremely rewarding. You get the benefits of entrepreneurship with the safety net of a proven brand. That is, of course, if you make a wise decision.
What Should You Actually Look For?
- Your Personal Fit: Are you interested in this business? If you hate doing food service work, don’t buy a restaurant franchise just because it seems profitable. You’ll be miserable, and that’s rarely a recipe for success.
- The Company’s Track Record: See how long they’ve been franchising (not just how long they’ve been in business). A company that’s been franchising successfully for several years has smoothed out the majority of the kinks in their system.
- Franchisee Satisfaction: This is huge. Talk to current and past franchisees—not just the ones the company refers you to. Ask them about their actual earnings, the quality of support they’ve received, and whether they’d do it again.
- Territory and Competition: Understand exactly what territory you’re getting and whether it’s exclusive. Also research the surrounding competition, both from other franchises and independents.
- Support Systems: What kind of training do they provide? How about ongoing marketing support? When problems arise, how quickly do they respond?
Do Your Research the Right Way
Here’s where most people go wrong—they rely too heavily on the franchise’s marketing materials. Of course those are going to paint a rosy picture! Instead, dig deeper:
Start by reading the Franchise Disclosure Document (FDD) in detail. The legal document contains valuable information about the financial performance of the franchise, litigation, and franchisee turnover rates. Pay careful attention to Item 19, which offers earnings claims, though keep in mind not all franchises disclose this information.
Reach out to franchisees in different markets and at different stages of their business life cycle. Someone who just opened might have a different perspective than someone who has been in business for five years. Ask direct questions about their revenues, their expenses, and their time commitment.
Drop in at different times and days to gain a true impression of the business. How busy are they? How do customers interact with the brand? What does the day-to-day operation actually look like in real life?
Get Professional Help (Seriously)
I cannot stress this strongly enough: involve a franchise attorney prior to signing anything. The franchise agreement is a complex legal document that will govern your business relationship for the next number of years. A skilled franchise lawyer can alert you to what you are getting into and identify any red flags.
Most people skip this step to save money, but it’s typically a costly mistake. That several thousand dollars you spend on securing legal advice up front can save you tens of thousands later on.
Consider hiring a franchise consultant, too. While some work on commission from franchisors, others are independent and can provide sound guidance in your search.
Red Flags to Watch Out For
Be wary of franchises that:
- Promise unrealistic returns or guarantee success
- Pressure you to sign quickly without giving you time to conduct your due diligence
- Won’t provide you with references to current franchisees
- Have high franchisee turnover rates
- Are actively engaged in litigation with franchisees
- Lack a proven business model or adequate support systems
The Reality Check: Pros and Cons
The Good: You are getting a tested business concept, brand identity, ongoing support, and likely easier access to financing. Most franchises also provide comprehensive training and marketing assistance.
The Challenging: You’ll pay ongoing fees (typically 4–8% of gross revenue), have limited flexibility in your operation of the business, and may have limitations on suppliers, hours of operation, and even on how you exit. You’re also at the mercy of the continued success and reputation of the franchisor company.
Making Your Final Decision
After all your research, the decision often comes down to gut feel combined with solid analysis. Ask yourself:
- Can I see myself doing this work for the next 10–15 years?
- Do the financial requirements fit my situation?
- Am I comfortable with the level of control I’ll have (or give up)?
- Do I trust this franchisor to assist me in being successful?
Getting Started
If you have done your homework and found a franchise you are interested in, the next step is typically applying and going through the franchisor’s qualification process. Remember, solid franchisors are picky too—they want successful franchisees who will make their brand shine.
Do not rush the process. Franchise agreements last 10–20 years, so there is no reason to rush into something you will regret down the line.
The Bottom Line
Franchising is an excellent method of becoming an owner, but success does not come with the territory just because you are buying an established system. The key is in the alignment of your interests, aptitudes, and goals with a franchise system that can position you for success.
Do your due diligence, ask the tough questions, obtain professional advice, and trust your instincts. If you do it correctly, you can find a franchise opportunity that not only flourishes on paper but also offers the satisfaction of building something worthwhile.
Ready to start looking? Take it one step at a time, and don’t be afraid to walk away from opportunities that don’t seem right. Your perfect franchise is out there—you just need to be patient and persistent in looking for it.