What Should You Research Before Buying a Franchise?

Before buying into a brand, be sure to know everything there is to know about the market, the industry and the franchise itself.

By Lauren Garcia1851 Editor

Updated 3:15PM • 09/27/21

The franchising industry is projected to grow substantially before the end of the year, with an expected 26,000 new locations opened and nearly 800,000 jobs added, contributing $477 billion to the U.S. economy throughout 2021. As new and experienced entrepreneurs look for investment opportunities in a newly disrupted consumer landscape, the franchise industry is poised to onboard a lot of new franchisees.

It’s critical for aspiring franchisees to spend as much time as possible researching the ins and outs of the brands they’re considering before signing on with a franchise. Here are five steps to take to narrow down your search and make an educated decision.

Study the Market

First, conduct some market research. Start with Google, and search for reputable pages with franchise insights, like 1851Franchise.com, Entrepreneur.com, Franchising.com or the International Franchise Association.

These resources will give you all the basics of owning a franchise. To further immerse yourself, consider attending a franchise expo, like IFEInfo.com or FranchiseShowInfo.com. Franchise expos put potential franchisees face to face with franchisors from all over the country.

Study the Industry

Once you’ve decided the best type of business for you, spend some time researching every franchise within that industry. Every franchise has a consumer site as well as a franchise development site, so be sure you’re gathering all the information from the correct places.

Make sure the franchises you’re most interested in have available territories in your preferred area. Check out analytics for the type of business on SBA.gov, or check out population data in your area on Census.gov.

Smallbiztrends.com even offers a free franchise comparison worksheet to facilitate this step.

Study the Franchise Disclosure Document

Every franchise is required to have this document. It’s a legal document that contains all the most pertinent information about the franchise, including the financials.

Item 19 is one of the most important components of this document, as it covers everything a potential franchisee would need to know from a financial perspective. This includes current standings of existing units or how the franchise might perform in the future.

Study the Franchisor

Once you’ve reached this step, you should be fairly certain you’re going to sign on with this brand. Conversations with the franchisor should be included in every step of the process, but this step involves officially applying.

Potential franchisees will fill out an application, provide confidential information and consent to a background check in order to qualify for a chance to move ahead with the relationship.

Study the Franchisees

Finally, some of the most crucial individuals in your decisions will be the actual existing franchisees themselves. They’ll be transparent and enthusiastic about sharing their experience and the opportunity with someone equally as excited to join.

As always, networking and word-of-mouth can be just the thing a potential buyer needs to seal the deal. Sometimes all it takes is a rave review to get fully on board with choosing a franchise brand.

Related Stories: