How To Research A Franchise Before You Buy
by Shahnawaz Alam Blog 28 July 2025
What should I consider before buying a franchise? Buying a franchise isn’t just some small purchase. It’s one of those big, life-shaping decisions you make as an entrepreneur.
There are thousands of options out there across pretty much every industry you can imagine. Sure, the potential to build something successful is huge.
But let’s be real—the risks can be just as big. Doing your homework before you sign anything can make all the difference between running a profitable business and watching your investment slip away.
The trick is knowing how to really evaluate a franchise so it fits your goals, budget, and, well, the kind of life you actually want.
What Should I Consider Before Buying A Franchise?
Before you decide to buy a franchise, you have to carefully consider all the financial aspects, including the franchisor and the franchise agreement, along with the suitability goals. Here’s a detailed breakdown for you!
1. Understanding The Franchise Disclosure Document
If there’s one document you need to cozy up with, it’s the Franchise Disclosure Document—or FDD for short. It’s basically your cheat sheet for figuring out what you’re getting into.
This document contains 23 sections full of important information that franchisors are legally required to provide at least two weeks before you sign.
Inside, you’ll find details on everything from their financial health to what fees you’ll be paying, what territory you’ll control, and how well the business model has performed so far.
Pay extra attention to Item 19. That’s where they might share earnings claims—basically, what other franchisees are making.
Not every franchisor includes this, but if they do, it’s a good peek at potential income (just don’t take it as a promise—you’re still on your own when it comes to results).
The FDD also spells out your upfront investment, royalties, and even restrictions on how you can operate.
2. Analyzing The Franchisor’s Financial Health
So, what should I consider before buying a franchise? So, here’s the deal: if the franchisor’s money situation is shaky, yours probably will be too. Financial stability directly impacts the security of your investment.
That’s why it’s worth combing through those audited financial statements tucked into the FDD. Look at revenue trends, debt levels, and cash flow.
A business that’s growing steadily and keeping its finances in order usually means it can support its franchisees in the long term.
Don’t skip over Item 3 either—it lists their litigation history. A little legal action isn’t shocking for bigger companies, but if you see a ton of lawsuits or major regulatory issues, that’s a big red flag.
Oh, and take a minute to check out who’s running the show. Knowing the backgrounds of the executives and founders gives you a sense of whether they have the expertise to lead in both franchising and their respective industries.
3. Evaluating Market Demand And Competition
Even the best franchise model won’t work if your local market isn’t right. So, dig into some basic demographics for your area to understand “What should I consider before buying a franchise? You can consider things like:
- Population,
- Income levels,
- Age groups, and
- Spending habits.
It’s all about figuring out if there’s enough demand for what you’ll be selling.
And don’t ignore the competition. Visit similar businesses in your area, take note of their pricing, and observe how busy they are.
Then ask yourself: how will this franchise stand out? Can it keep that edge, or will it just blend into the crowd?
Many entrepreneurs utilize tools like Franchise FastLane to expedite this process. They offer market research and performance data that could save you weeks—or months—of digging.
4. Connecting With Current And Former Franchisees
Numbers are one thing, but hearing from people running the business? That’s priceless. The FDD provides contact information for current franchisees, so reach out to several—try to speak with individuals in different markets and at various stages of growth.
Ask them about startup costs, ongoing expenses, their revenue, and how well the franchisor supports them.
And here’s a tip if you are thinking: “What should I consider before buying a franchise?” Don’t just chat with the happy ones. Try to find franchisees who are struggling or even those who’ve left the system.
They’ll be more likely to spill the real pain points. Former franchisees can provide some of the most honest feedback, although obtaining their contact information may require a bit more effort.
5. Assessing Training And Support Systems
A solid franchise doesn’t just hand you a manual and say, “Good luck!” Look at what kind of training they provide upfront. How long is it? Where does it happen?
Does it actually teach you how to run the business day-to-day? The good ones mix classroom-style learning with hands-on training at an actual location.
Then there’s the ongoing support. Ask current franchisees if the franchisor is responsive when problems come up. Do they help with marketing?
Do they offer updated materials or tech support? The best systems stay in touch and help you tackle challenges instead of leaving you to fend for yourself.
6. Financial Planning And Investment Analysis
Here’s where a lot of people get blindsided: the costs go way beyond that initial franchise fee. Add up everything—equipment, inventory, signage, renovations, permits, working capital—the whole package. Don’t forget the recurring stuff like royalties and marketing fees.
Develop a comprehensive financial plan that extends beyond the initial franchise fee. Consider all startup costs, including equipment, inventory, signage, leasehold improvements, and working capital needs.
When you start running numbers, be realistic. Use the financial info the franchisor provides, but also factor in what you know about your market and your own experience.
Build out three versions of your projections—conservative, moderate, and optimistic. And make sure you’ve got enough of a financial cushion to survive the early months when revenue may be slower than expected.
7. Location And Territory Analysis
If your franchise relies on foot traffic, location is king. Study the franchisor’s rules for site selection and figure out if you’ll get any territory protections.
Then really think through visibility, traffic flow, accessibility, and parking. The rent factor and the cost of building out the space.
Some locations look great but require expensive renovations or come with permit headaches. And ask how much help, if any, the franchisor offers in finding and negotiating for a site.
What Should I Consider Before Buying A Franchise In Omaha? Making Your Final Decision
By the time you’ve done all this research, you’ll have a mountain of information. Organize it. Weigh the pros against the cons.
And be brutally honest with yourself: Does this franchise align with your goals, finances, and appetite for risk?
Talk to experts—an attorney, an accountant, maybe even a business consultant. They’ll spot things you might miss and make sure you understand what you’re committing to.
At the end of the day, buying a franchise isn’t just a business move. It’s a long-term commitment that’ll shape your life for years.
Take the time to do the digging now. It could mean the difference between owning a thriving business and a cautionary tale.
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