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5 Must Know Tips for Buying a Franchise

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Purchasing a franchise is a popular way to start a new business. Franchising is a great way to expand a business so when it’s done well both the franchisor and the franchisees can profit from being in business together. There’s a contract between the two that needs to be thoroughly assessed and the franchisee needs to get legal counsel before rushing in and signing it.

All businesses including franchises carry risks. For example, there are obligations to meet, and penalties for not doing so.

There’s also the initial payment and an ongoing payments to the franchisor, so that’s a liability before the new franchise has even opened it’s doors! So here are some tips to guide you when purchasing a franchise.

1. Do your Research & Due Diligence

Fools rush in where angels fear to tread, you must of heard of it, it was first written by Alexander Pope way back in 1711.

Today we’re all in a hurry and we want instant success. Buying a franchise is no guarantee of that, so it pays to take heed of even one of the earliest sayings that basically warns against taking on what more more experienced people leave alone.

Therefore take your time, thorough analyse the business, its brand reputation, what it offers and if that appeals to you.

Don’t be easily impressed with what you see in their advertising & marketing. It’s a good thing to like it but that’s not your due diligence.

How To Learn About The Franchise

  • Speak and ideally meet other franchisees. What have been their challenges with the business and how it operates?
  • Contact clients of the business and seek to learn of their experiences.
  • Delve deeper into the franchisor and the business. Are they growing? Profitable? What is their debt history? Do they have any pending lawsuits?

The answers to these questions should provide confidence that the risks you’re taking with a franchise are worthwhile.

You can begin by carefully reviewing the Franchise Disclosure Document.

2. Consult an Attorney

The franchise paperwork can be quite complicated. Therefore, you need a good franchise attorney who’ll shed some light on the legal issues surrounding the purchase of a franchise. Let them advise you accordingly before signing any legally binding documents.

3. Consider a Formal Business Structure

A formal business structure helps you draw the line between your assets and that of the franchisor. For instance, you are better placed approaching the franchisor as an LLC than a sole proprietor. The former allows you to cut better deals. In addition, a formal structure might offer you perks such as relieving you of elaborate taxation duties.

4. Location, Location, Location

Location is everything in any kind of business. You need to select a location where your target audience is largely present. A good way of knowing this is by researching the traffic patterns and parking space if it’s in a town. Understand what brings people to the area, and more finely graded, the street, and maybe even the specific section of the street.

Also, check for the potential competition. If there are rivaling businesses within, that’s not necessarily negative, you’ll find there’s a psychology to shopping that insists all competitors should be in the same area.

5. Focus on Service

When you purchase a franchise, you get the advantage of a ready made market. In addition, the franchisor manages the marketing/advertising albeit the fee for it will be divided out among the franchisees. In saying that remember:

The whole is greater than the sum of its parts.

So with that advertising power, it is up to your franchise to convert enquires into business. Offering exceptional customer service is a sure way of retaining clients and attract referrals. So invest in staff training and of course lead by example.

The franchisor also has a role to play in the customer experience and thus brand reputation. Look for a franchise that ranks high e.g. Entrepreneur #14 Franchise 2018.

It’s not easy to be ranked well and especially with the abundance of franchise opportunities, up for grabs.


Franchises mostly work extremely well and it’s why many brands have chosen it to grow their business from local to national and then global household names.

Of course there are operating controls and restrictions to meet, when your business is a franchise. But that’s the trade off for a proven business model, with brand reputation too…..when you choose the right franchise!

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