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Lunch and Learn Webinar: 7 Things to Know Before Buying a Franchise

Published: June 2, 2021
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On the fence about investing in a franchise business? Franchise Business Review Founder and CEO Eric Stites discusses what you should know before buying a franchise business.

This webinar is part of Franchise Business Review's ongoing Lunch & Learn Series to help prospective entrepreneurs evaluate and invest in a successful franchise business.

Buying a franchise business can be a great investment. But how do you choose the right franchise opportunity? Here are the 7 key things everyone should know before investing in a franchise business, as well as questions you should be asking.

1. Start with YOU and why? 

a. Why do you want to own your own business?

b. What drives you? 

c. What are you passionate about? 

d. What are your strengths and weaknesses?

e. What are your goals? (Lifestyle, financial, etc).

2. Understand the financial investment 

a. How much money do you have to invest in a business? 

b. What types of financing options are available? 

c. What are the initial costs to open a franchise? 

d. What other types of fees will you have to pay? (royalties, advertising, technology, etc.) 

e. What will be the long-term capital needs for the business? 

f. If all goes well, what will your revenues/profits look like? 

g. What will your franchise business be worth in a few years?

h. If things go off-track, what additional capital might you need… and how will you get that money? (Financial planning with help from a local accountant!)

3. Understand the industry

a. Who are the major players? 

b. What other businesses offer similar products/services? 

c. What are the industry trends/innovations? 

d. What type of employees will you need? 

e. Is the industry growing or shrinking? Recession-resistant? 

f. How will new technologies impact the industry in the next 5-10 years?

g. What other potential disruptions could there be?

4. Understand your local market 

a. Who are your potential customers? 

b. Where do they live/work? 

c. Where are they currently spending their money on similar products/services? 

d. Who are your competitors? 

e. What is their reputation? 

5. Do your homework on the franchise company 

a. Who are they? 

b. What experience/track record of success do they have? 

c. What’s their long-term strategy? 

d. What’s their reputation in the industry?

e. Are they leaders or followers/copycats? 

f. What do franchisees say about them? 

g. How successful are they? 

h. What red flags are in their Franchise Disclosure Document (FDD) or their franchise agreement? (have a franchise attorney review!)

6. Do your homework with franchisees

a. What skills/background do the most successful franchise owners have in common?

b. How do they spend the majority of their work time? 

c. What are their biggest challenges?

d. What do they like/dislike about the franchise company and the franchisor?

e. Are there common issues/complaints?

f. Do franchisees support one another?

7. Understand the training & startup process 

a. What is the initial franchise training process? 

b. What support is provided during year one? Year two, etc?

c. What resources are provided for training your employees/managers?

d. What types of on-going support are provided?

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DISCLAIMER: The information contained herein has been obtained from sources that we believe to be reliable, but its accuracy and completeness are not guaranteed, and does not constitute any investment recommendation. A franchise investment requires a personal assessment of your objectives, financial situation, skills, goals, and many other factors. Before making any investment decision, you need to consider whether this information is appropriate to your situation and needs.

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