6 Questions to Ask Before You Begin Your Franchise Search When exploring franchises to buy, there are some crucial factors you should consider.
Starting a business from scratch can be a daunting task — and many people simply don't know where to start. That's why some aspiring entrepreneurs choose to invest in a franchise.
Instead of building a new business from the ground up, a franchise offers the potential for success with an established brand and all the support that comes with it, from a proven business model to business training.
Not all franchises are created equal, so it's important to do your due diligence when exploring franchise opportunities. That starts with evaluating some key factors before investing in an opportunity.
Not sure where to begin? Start by asking yourself these six questions.
Related: Considering franchise ownership? Get started now and take this quiz to find your personalized list of franchises that match your lifestyle, interests and budget.
1. Do your goals and skills align with the franchises on your shortlist?
Before settling on a single franchise as your ticket to business ownership, it's critical to spend time reflecting on your personal goals and skills. The goal is to make sure you and your lifestyle have the best chance at matching up with the franchise you choose.
Ask yourself questions like:
- Do your aspirations and interests align with each company?
- What do you want to achieve through business ownership?
- Are you looking for financial gains, a better work-life balance or the satisfaction of running your own business?
- Do you enjoy the industry that the franchise is in?
If you have an honest conversation with yourself about your goals, passions and abilities, you can narrow down your search to the franchise that best aligns with you. Think about it this way: If you're a vegan, it wouldn't make sense for you to buy a meat-focused fast-food chain.
Related: Which Franchise is Right For You? Follow These Steps
2. Is there a need for a certain business in your area?
Determine if your community needs a certain business, like a specialized gym, education center or restaurant, and see if that business type aligns with your goals and skills.
When considering franchise ownership, you want to steer clear of markets that are oversaturated in your area. It's also smart to conduct market research to ensure there's an interest in the type of franchise you're thinking of opening. For example, if you want to open a fitness franchise but your city already has several cycling and pilates studios within a 10-mile radius, you might consider opening a location in a neighboring town or looking at other types of workout concepts.
3. What is the franchise's reputation?
Once you've identified the industries and franchises that align with your goals and skills, it's time to research the franchisors and ensure they are a good fit overall.
Look for franchises that have a positive reputation in their industry and a history of success. Online reviews and ratings are a good place to start. You can also talk to current and former franchisees to get their personal experiences with the franchisor's support, training and business model.
A reputable franchise will be transparent about its financials, marketing strategies and expectations for potential franchisees.
Related: We've analyzed mountains of data for thousands of franchises and found the best opportunities for you in 2023 in our 44th Annual Franchise 500 Ranking.
4. What are the investment costs?
Investing in a franchise typically requires a significant amount of upfront capital, and it's important to have a grasp of the total costs needed as well as the potential return on investment (ROI).
The upfront investment will include the initial franchise fee, ongoing royalties, advertising fees, brick-and-mortar costs and other expenses. Reputable franchises will offer a detailed breakdown of their investment costs and fees plus a realistic projection of your ROI.
Be wary of franchises that make unrealistic promises, downplay risks and are not forthcoming about their fees.
5. Can you count on the support and training?
One of the biggest advantages of becoming a franchisee is the ongoing support and training provided by the franchisor. Look for franchises that offer initial comprehensive training programs and continuous support for operations, marketing and management. After all, this might be your first business venture — which means you'll likely need some help navigating the experience.
A worthy franchisor will set you up for success with the tools and resources you need. Support can range from a detailed operations manual and on-call team to a network of other franchisees within the company ready to offer advice and answer questions.
6. Have you reviewed the franchise agreement?
Before officially signing with a franchise, you should carefully review the franchise agreement. The franchise agreement is a legal document that details the rights and responsibilities of both the franchisor and the franchisee.
It's critical to understand the terms and conditions before committing to a franchise, as there might be clauses that dictate the level of control you will have, the duration of the agreement, the fees involved and restrictions on your ability to sell or transfer the franchise.
Because the franchise agreement can be long and complex, it's advised to consult with a lawyer or other professional to ensure you fully understand all aspects of the document.
Franchising might be right for you
Investing in a franchise can be a smart and fruitful business opportunity, but it's important to do your due diligence when reviewing franchise options.
Start by considering your personal goals and skills, and align them with any gaps in your specific market. Then determine the strength of the franchisor's reputation, the investment costs and ROI and the support and training you can expect. Remember: Buying a franchise is a big decision, so don't rush the process.
Related: Owning a Franchise Could Be Your Fastest Route to Business Ownership. Here's What You Need to Know to Succeed.