zpostcode
Trying to choose a franchise? 9 tips to consider
Apr 4, 2025 10:28 PM

  

Trying to choose a franchise? 9 tips to consider1

  You’ve thought long and hard about the pros and cons of buying a business franchise, and you’ve decided that it’s what you want to do. You figure you have the time, business savvy, and you’re pretty sure you have the capital (and courage!) to get started. So, what’s next?

  Not only are there numerous brands to consider, from local to national and less-known to popular, but they’re also spread across a wide range of industries, from gas stations and fitness centers to coffee shops, fast food, and sit-down restaurants. Last but not least, the start-up costs and guidelines (and restrictions) for each franchise can vary widely.

  Choosing the right type of franchise can be tricky, so here are nine tips to consider. Some of them you’ll want to consider before the big “discovery day,” when you’ll have the opportunity to meet with franchisors (and other key members) to evaluate your best franchise fit.

  Tip #1: Make sure the franchise matches your interests and skillsFirst off, you should select a business that can sustain your interest for the long haul, because owning and operating a business is a long-term investment. Industry know-how and skills help, too, but if you have the right aptitude and interest (and better yet, if the franchisor offers a training program), you’ll pick up a lot of the necessary skills as you go.

  Tip #2: Carefully read the franchise disclosure document (FDD)The franchise disclosure document (FDD) is a huge information dump divided into 23 sections that more or less cover everything you need to know about becoming a franchisee—from initial costs and the franchisor’s financial performance to its trademarks and restrictions. It’s an all-encompassing rulebook, guidebook, and, in a way, an almanac for the franchisor.

  Tip #3: Consider contacting an attorney or franchise consultantThere’s plenty of value in talking to other franchisees, franchise consultants, and financial and legal professionals when assessing the various aspects of a franchise purchase. Buying a franchise is a huge investment decision. It’s probably best done with professional guidance, particularly if you don’t fully understand the FDD.

  Tip #4: Consider the amount of capital needed to cover the initial start-up costsWhen you gather a list of franchise prospects, take a look at their general initial investment costs. Some can start as low as $5,000, as is the case for many cleaning service franchises. On the higher end, some big national brands, like McDonald’s, not only require millions of dollars to get started, but also a high net worth of non-borrowed capital. In this case, going into debt is not an option, although you could partner with other investors.

  Tip #5: Consider brand strength and (local) market demandEvery commuter rail station needs a coffee shop, right? Yes, but if it already has five, adding a sixth might be a tough sell.

  A franchise might have a strong brand and business plan, but that won’t mean much if there’s very little demand for the product in your local market. Similarly, a weak brand in a saturated market might get drowned out—initially, at least. This is where owning a company 100% (versus franchising) may have its advantages, because you can tweak the brand, products, and processes to tailor it to the local market. As a franchisee, however, you’re limited from the get-go.

  Do your market research, understand your target demographics, and evaluate the market’s level of competitiveness and saturation.

  Tip #6: Evaluate the franchisor’s business plan and financial performanceThe franchisor will likely include a standard business plan in its FDD. Take a hard look at the business model and growth strategy. Also, read up on the company’s financial statements (particularly its balance sheet and income statement).

  Look for revenue growth and earnings growth, and run the numbers through various financial ratios to make sure the company’s financial health is favorable. Talk to other franchisees or industry insiders (such as franchise consultants) to help determine whether your prospective franchise is as promising in reality as it appears on paper.

  Tip #7: Take a wide-angle view of the franchisor’s market positioningHere’s something that might not be apparent in an FDD: the company’s competitive positioning across the broader market or industry. Whether a brand is a small contender or a well-entrenched titan, you’ll want to get a big-picture view of its competitive advantages, unique value propositions, and anything else that might give it an edge over its competitors.

  It isn’t easy to conduct comprehensive research on market or industry trends, but it’s the only way to assess your franchisor’s potential for growth and sustained profitability.

  Tip #8: Check if the agreement terms match what you can (or are willing to) doAre the franchising fees and/or royalties favorable and sustainable? Can you work comfortably within the franchisor’s guidelines and fulfill your contractual obligations? It’s not just a question of your available capital—are you getting enough bang for your buck? If not, you might consider a different franchise opportunity.

  Tip #9: Does the franchisor provide training or support?There’s a big difference between cooking burgers on your stove and running a team that’s operating a dozen modern, commercial-grade appliances. And how do you manage personnel, build schedules, stay current on state laws and health codes, and keep track of inventory?

  Does your franchisor provide training, operational guidance, marketing assistance, or any form of ongoing support? These additional perks can be helpful, especially if this is your first franchise. Also, you’ll want to know how helpful the training and support have been to other franchisees. Be sure to talk to a few.

  The bottom lineChoosing the right franchise can be a long and laborious process. From selecting a business that matches your interest and skills to determining a franchise’s growth potential in your local market, there’s plenty of homework to be done before the actual grind begins.

  But if this is the kind of venture you want to pursue, then a slow, steady, and strategic approach may be well worthwhile. Also, don’t forget to consult fellow franchisees and other experts before making a purchase. After all, the point of buying a franchise, versus creating a business from scratch, is to go into business for yourself but not necessarily by yourself.

  ReferencesWhat Is a Franchise Disclosure Document? | franchise.law

Comments
Welcome to zpostcode comments! Please keep conversations courteous and on-topic. To fosterproductive and respectful conversations, you may see comments from our Community Managers.
Sign up to post
Sort by
Show More Comments
Recommend >
19 Significant Buildings Worth Seeing in Denmark
      Denmark spreads over a peninsula and an archipelago of more than 400 islands. Its architectural landscape is just as varied as the land it occupies.   Earlier versions of the descriptions of these buildings first appeared in 1001 Buildings You Must See Before You Die, edited by Mark Irving (2016). Writers’ names appear in parentheses.   Høpfner A/S...
11 Must
     None Mexico City was founded in 1521, on the ruins of Tenochtitlán. It is a densely populated city surrounded on three sides by mountains, and at its heart is a gargantuan public square with a long history. These 11 buildings capture the dynamic spirit of Mexico City’s past and present.   Earlier versions of the descriptions of these buildings first...
19 Places That Exemplify Cool Swiss Style
      Earlier versions of the descriptions of these buildings first appeared in 1001 Buildings You Must See Before You Die, edited by Mark Irving (2016). Writers’ names appear in parentheses.   Valerio Olgiati’s redesign of a 19th-century building in Flims constitutes a radical transformation of its character. Placed directly by the curving roadside, the Yellow House enjoys...
20 Buildings Not to Miss in Australia
      From the Rose Seidler House and Mooloomba House to the Sydney Opera House, these 20 buildings are examples of some of Australia’s most architecturally and historically important structures.   Earlier versions of the descriptions of these buildings first appeared in 1001 Buildings You Must See Before You Die, edited by Mark Irving (2016). Writers’ names appear in...
Information Recommendation
19 Historic Buildings to Visit in Rome
      The term historic may be understated for a city that can trace its origins, as a continuous settlement, to the first millennium BCE. Nearly everything about Rome might be considered historic. This list merely skims the surface of the buildings worth seeing in Italy’s national capital.   Earlier versions of the descriptions of these buildings first appeared in...
14 Buildings That Lay Bare Scotland’s Soul
      “I am a Scotsman,” Sir Walter Scott once wrote; “therefore I had to fight my way into the world.” This list explains how these 14 buildings fought their way onto Scottish soil.   Earlier versions of the descriptions of these buildings first appeared in 1001 Buildings You Must See Before You Die, edited by Mark Irving (2016). Writers’ names...
12 Revolutionary Buildings to Visit in Vienna
      Vienna has been the capital of the Holy Roman Empire and the empire known as Austria-Hungary. After World War II, it was occupied by multiple countries’ forces. History courses through its streets, as evidenced by these 12 buildings, but revolution does too. Each of these buildings performs its own type of rebellion.   Earlier versions of the descriptions...
19 Essential Italian Churches
  Italy’s rich architectural heritage includes thousands of churches built across two millennia. Here are 19 of the most notable ones.   Earlier versions of the descriptions of these churches first appeared in 1001 Amazing Places You Must See Before You Die, edited by Richard Cavendish (2016). Writers’ names appear in parentheses.   Basilica of San Vitale      basilica of San Vitale, Ravenna,...
11 Iconic Buildings in Brazil
      Brazil is a very large country: it fills half of South America and is larger, in area, than the continental United States. That means it has a rich and vast architectural heritage. Here are just 11 of its most iconic buildings.   Earlier versions of the descriptions of these buildings first appeared in 1001 Buildings You Must...
13 Buildings You Should Visit When You’re in Tokyo
     topimages/Shutterstock,com Tokyo was once known as Edo, which began as a fishing village many centuries ago. Edo became Tokyo (”Eastern Capital”) in the 19th century, when it became Japan’s capital. This list highlights just a few of the many significant buildings in Tokyo.   Earlier versions of the descriptions of these buildings first appeared in 1001 Buildings You Must See...
21 Tombs Around the World
     A tomb, according to Britannica’s entry, is “a home or house for the dead.” Here are 21 tombs (or sites of many individual tombs) from around the world that show the varied ways that different cultures at different times have housed and honored their dead.   Earlier versions of the descriptions of these tombs first appeared in 1001 Amazing...
13 Buildings That Tell Berlin’s Story
      The history of Berlin is a long one, filled with triumphs and tragedies. These 13 buildings span centuries and capture, in microcosm, the city’s unique progression through time and arrival in the present.   Earlier versions of the descriptions of these buildings first appeared in 1001 Buildings You Must See Before You Die, edited by Mark Irving (2016)....