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How Should You Choose a Franchise?

When deciding which franchise will be the best investment, potential franchisees should take these three important steps to ensure success.

By Lauren Garcia1851 Editor
Updated 2:14PM 09/16/21

Potential franchisees ready to find the perfect brand should first know what they’re most passionate about and then pursue that by researching options, asking questions, understanding important financial documents and using every tool at their disposal to choose the most lucrative franchise for them. 

The franchising industry accounts for nearly 8 million American jobs and contributes almost $700 billion to the national economy. The International Franchise Association projected that by the end of 2021, as an industry affected by the pandemic, franchising will have recovered to nearly 2019 levels in business growth, economic outlook and contribution to the GDP. 

Franchises provide countless benefits, like consistency, efficiency, quality products and services, support, loyalty and trust. It’s a solid investment for any entrepreneur, but the right investment looks different for everyone. Here are a few things to keep in mind when choosing a franchise. 

Take Inventory of Your Personal Interests

Business-minded individuals who enjoy operating within a well-organized system will thrive as franchise owners. But with nearly 800,000 franchises in the U.S., how do you narrow that down? The first step for many who aren’t already familiar with specific franchises might be to explore brands that resonate with their own personal interests. What are you most passionate about? Reflecting on these things will help guide the decision. 

This step can also include deciding just how involved a franchise owner you’d like to be. Will you be an owner-operator, or would you operate in the background as more of a silent partner? Knowing and being honest with yourself about your availability will help determine your level of involvement in your franchise. 

Research Franchise Options

Say, for example, the potential owner has decided they’re passionate about doughnuts. Their next step would be to check out the options in that field. Take into consideration the size of the franchise. How many units does it currently have, and is it growing at a steady pace? Do you want to franchise with a big company like Dunkin’ Donuts, or would you prefer to partner with a smaller company like Duck Donuts, with just over 250 stores in 25 states? How supportive is the franchisor of its franchisees? These are all important considerations before making a commitment. 

Financing is also a huge component of choosing a franchise, so be sure you know exactly what you can afford as an owner. 

When researching options, try to contact current owners to get their impression of the business. Ask all the questions you can think of, and look to them as mentors as you continue your journey as a franchisee. Attending a franchise expo is a good next step toward creating a solid network within the industry and getting all the information you need to make a decision. 

Review the Brand’s Financial Disclosure Document

Every franchise has a Financial Disclosure Document (FDD); it’s required by law. Once you’ve settled on a brand to pursue, it’s important to understand everything on its FDD. 

The FDD will tell you how profitable the franchise is and every fee that will go into starting up your own. When you’re confident you’d like to sign with a franchise, be sure to have an attorney or financial advisor review the FDD. 

By using all the tools at their disposal, potential franchise owners can make the most informed decision for a successful franchise operation. 

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