How Do You Research What Franchise To Buy?


Investing in a franchise is a significant decision that demands thorough research and due diligence. The success of your franchise venture hinges on the careful evaluation of various factors, from the franchise’s financial health to its operational model and market positioning. In this comprehensive guide, we will explore the best practices and strategies for researching a franchise investment, providing prospective franchisees with the tools they need to make informed decisions and set the stage for long-term success.


I. Understanding Your Goals and Preferences:


A. Define Your Objectives:

1.     Clearly articulate your goals for entering the franchise industry.

2.     Consider factors such as financial objectives, lifestyle preferences, and long-term business aspirations.


B. Identify Industry Preferences:

1.     Determine your preferences regarding the type of industry or business you want to be involved in.

2.     Assess your interests, skills, and passion to align them with franchise opportunities that resonate with your personal and professional goals.


CEvaluate Lifestyle Fit:

1.     Assess how the demands of the franchise align with your lifestyle and personal commitments.

2.     Consider factors such as work hours, travel requirements, and the overall balance between work and personal life.


II. Researching Franchise Opportunities:


A. Industry Trends and Growth:

1.     Conduct market research to identify trends and growth prospects in your chosen industry.

2.     Analyze industry reports, market studies, and relevant publications to understand the broader landscape.


B. Franchise Directories and Platforms:

1.     Explore franchise directories and online platforms to discover a wide range of franchise opportunities.

2.     Utilize reputable websites that provide comprehensive information on various franchises, allowing you to compare options.


C. Attend Franchise Expos and Events:

1.     Attend franchise expos and events to meet franchisors, ask questions, and gather information.

2.     Engage with representatives to gain insights into the culture, values, and offerings of different franchises.


D. Franchise Rankings and Reviews:

1.     Consult franchise rankings and reviews to assess the reputation and performance of potential franchises.

2.     Pay attention to feedback from current and former franchisees, gaining valuable insights into the franchisor-franchisee relationship.


III. Evaluating Franchisor Financial Health:


A. Review Financial Disclosures:

1.     Request the Franchise Disclosure Document (FDD) from the franchisor.

2.     Scrutinize the financial disclosures, including revenue figures, fees, and potential additional costs.


B. Assess Profitability and Stability:

1.     Evaluate the franchisor’s profitability and financial stability.

2.     Look for consistent revenue growth, manageable debt levels, and a stable financial track record.


C. Understanding Franchisee Earnings:

1.     Analyze the earnings claims made by the franchisor in the FDD.

2.     Consider the average revenue and profitability of existing franchise units to gauge the potential financial performance.


D. Legal and Litigation History:

1.     Examine the legal and litigation history of the franchisor.

2.     Investigate any legal disputes, litigations, or regulatory issues that may impact the franchise system.


IV. Assessing Franchise Support and Training:


A. Training Programs:

1.     Evaluate the training programs offered by the franchisor.

2.     Assess the comprehensiveness of initial training and ongoing support for franchisees.


B. Operational Support:

1.     Understand the level of operational support provided by the franchisor.

2.     Consider factors such as marketing support, technology assistance, and ongoing guidance in day-to-day operations.


C. Marketing and Branding:

1.     Assess the franchisor’s marketing and branding strategies.

2.     Evaluate the effectiveness of national and local marketing efforts in promoting brand visibility and attracting customers.


D. Franchisee Satisfaction:

1.     Review franchisee satisfaction surveys and testimonials.

2.     Gauge the overall satisfaction of existing franchisees with the level of support, training, and communication provided by the franchisor.


V. Understanding Franchise Agreement Terms:


A. Franchise Fees and Royalties:

1.     Understand the initial franchise fee and ongoing royalties.

2.     Evaluate the fee structure in relation to the value and support provided by the franchisor.


B. Territory Rights and Restrictions:

1.     Review the terms related to territory rights and restrictions.

2.     Understand the exclusivity of your territory and any limitations on territorial expansion.


C. Renewal and Exit Clauses:

1.     Examine the renewal and exit clauses in the franchise agreement.

2.     Understand the conditions for renewing the franchise agreement and the options available in case of termination.


D. Intellectual Property Rights:

1.     Review the franchisor’s policies regarding intellectual property rights.

2.     Understand the use of trademarks, branding, and any restrictions on modifications to the business model.


VI. Conducting Franchisee Interviews and Visits:


A. Connect with Existing Franchisees:

1.     Reach out to current and former franchisees for firsthand insights.

2.     Ask about their experiences, challenges, and the level of support provided by the franchisor.


B. Visit Existing Franchise Locations:

1.     Visit existing franchise locations to observe operations firsthand.

2.     Interact with staff, customers, and franchisees to gather insights into the day-to-day functioning of the business.


CInquire About Challenges and Successes:

1.     Ask existing franchisees about the challenges they faced and how they overcame them.

2.     Learn about success stories within the franchise system and identify common factors contributing to success.


VII. Legal and Regulatory Compliance:


A. Legal Review with a Franchise Attorney:

1.     Consult with a franchise attorney to review the franchise agreement and legal documents.

2.     Ensure a comprehensive understanding of your rights, obligations, and potential legal implications.


B. Compliance with Franchise Laws:

1.     Ensure that the franchisor complies with relevant franchise laws.

2.     Be aware of state-specific regulations governing franchise agreements and disclosure requirements.


C. Understanding Dispute Resolution Mechanisms:

1.     Review the dispute resolution mechanisms outlined in the franchise agreement.

2.     Understand the processes for addressing disputes and resolving conflicts with the franchisor.


VIII. Financial Planning and Return on Investment (ROI):


A. Develop a Comprehensive Business Plan:

1.     Create a detailed business plan that includes financial projections and operational strategies.

2.     Use the business plan to assess the feasibility of the franchise investment and plan for potential challenges.


B. Evaluate Return on Investment (ROI):

1.     Assess the potential return on investment based on the franchisor’s earnings claims and historical performance.

2.     Consider factors such as initial investment, ongoing expenses, and revenue projections.


C. Cash Flow Analysis:

1.     Conduct a cash flow analysis to understand the financial implications of the franchise investment.

2.     Consider the impact on your personal finances, liquidity, and financial stability.


IX. Case Studies: Learning from Successful Franchise Investments:


A. Case Study 1: Strategic Research and Industry Alignment

·       Scenario: A franchisee interested in the food industry.

·       Success Factors:

1.     Conducted thorough research on various food franchises.

2.     Aligned personal interests with a franchise that demonstrated strong financial health and provided comprehensive support.


B. Case Study 2: Regional Market Understanding

·       Scenario: A franchisee exploring opportunities in a specific region.

·       Success Factors:

1.     Conducted market-specific research to understand regional dynamics.

2.     Chose a franchise with a proven track record in similar markets and tailored support for regional success.


Researching a franchise investment is a multifaceted process that requires a strategic and comprehensive approach. Prospective franchisees must consider various factors, from industry trends and financial health to franchise support, legal compliance, and financial planning. By following the best practices outlined in this guide, individuals can navigate the complexities of franchise research with confidence, making informed decisions that align with their goals and set the stage for a successful entrepreneurial journey.


Remember, the key to a successful franchise investment lies in the diligence and dedication you put into the research process. By thoroughly understanding the franchise opportunity, evaluating its alignment with your goals, and seeking input from existing franchisees, you can embark on a franchise venture well-equipped for long-term success.


For more information on how to find the right franchise model, contact Chris Conner, President of FMS Franchise/Franchise Marketing Systems:

[email protected] 

or visit the FMS Franchise Site: