5 Steps to Franchise Research

How to Do Proper Research Before Buying a Franchise: 5 Key Steps for Success

1. Look at Multiple Franchises to Understand the Model and Support

2. Set Your Priorities

3. Set Your Investment Threshold

4. Talk to Lots of Different Franchise Owners

5. Write a Business Plan

Investing in a franchise can be an exciting way to start a business with a faster ramp up, proven model, established brand, and ongoing support. However, like any major investment, it’s essential to do your homework before diving in. Proper research not only helps you understand the franchise model but also ensures that you’re making a confident, well-informed decision that aligns with your personal and financial goals. Here are five key steps to consider before buying a franchise.

1. Look at Multiple Franchises to Understand the Model and Support

One of the first things you should do is compare different franchise opportunities. Don’t settle on the first one that looks appealing. By researching and evaluating multiple franchises, you’ll get a better understanding of how the franchise model works and how different franchisors provide support to their franchisees.

Different brands have varying levels of support, training, marketing resources, and operational structures. Some may offer more hands-on assistance in the early stages, while others may expect you to be more independent from the get-go. By looking at multiple options, you’ll be able to gauge which franchise aligns with your expectations for support, and also which model suits your business style and personality. Do they offer you vendors for payroll, marketing, procurement, email, customer relationship management, point of sale and more. These are all decisions you will have to make and you need to know how much help you will have.

2. Set Your Priorities

Before diving into the financial aspects of franchising, take some time to assess your personal goals and preferences. This is an often-overlooked step that can make a huge difference in your satisfaction as a franchise owner. Consider the following:

• How many hours do you want to work? Franchises vary in the time commitment they require. Some franchises are more of a "hands-on" operation, meaning you’ll need to work long hours, while others may allow for more of a management role.

• Do you want to run the business, manage it, or be absentee? Depending on the franchise, you may need to be directly involved in daily operations, or you may prefer a more managerial, strategic role, overseeing staff and making high-level decisions.

• How many employees are you comfortable managing? Larger franchises might require you to oversee a larger team, while others may be smaller and more manageable. Think about how many employees you’re prepared to hire and manage, and how much responsibility you're willing to take on.

By considering these questions, you’ll have a better idea of what you’re looking for in a franchise and whether it fits your desired lifestyle.

3. Set Your Investment Threshold

Franchise ownership often requires a significant financial investment, which can vary widely depending on the brand and location. Beyond just the franchise fee, you’ll need to consider the upfront costs of real estate, equipment, inventory, and other initial expenses.

It’s crucial to set a clear investment threshold before you start your search. How much money are you willing (and able) to invest upfront? While financing options like loans are available, many of the initial costs will need to be paid out of pocket. Make sure you have enough cash on hand to cover these expenses, as well as working capital to cover the first few months of operation before your business becomes profitable. Assume you need 25-30% of the total start-up cost and working capital.

4. Talk to Lots of Different Franchise Owners

One of the most important steps in your research is speaking to current franchise owners. While the franchisor will provide you with a list of owners to contact for validation calls, it’s essential to reach out to multiple franchisees across different regions and markets.

Franchise Disclosure Documents (FDDs) often present financial performance and operational expectations, but they don’t tell the full story. Speaking directly to franchisees—especially those in similar-sized markets or demographic areas—will give you a clearer picture of the day-to-day realities of owning the franchise.

Look for franchise owners who:

• Operate in areas similar to yours (urban vs. suburban)

• Have been in business for several years (so they can speak from experience)

• Offer candid feedback, both positive and negative

• New franchisees (to know what differed from the sales pitch and what surprised them)

These conversations can help you understand how well the franchise system really works, what challenges you might face, and whether the reality of running the business matches the promises made by the franchisor.

5. Write a Business Plan

Lastly, but perhaps most importantly, take the time to write a detailed business plan. This step is crucial for both sanity-checking your decision and for making sure you understand the business inside and out.

A solid business plan should include:

• An overview of the franchise: A clear understanding of the business model, the product or service, and how you’ll operate.

• Financial projections: Include realistic sales, operating costs, and profit margins based on the FDD and insights you’ve gained from speaking with franchisees.

• Marketing and growth strategy: How will you attract customers and grow the business? What marketing support does the franchisor provide, and what will you need to handle on your own?

• Value proposition: Why will customers choose your franchise over competitors, and how can you deliver unique value in your local market?

Writing a business plan forces you to put all the facts and figures together and helps you identify potential weaknesses or risks. It’s also a valuable document if you need to secure financing.

Final Thoughts

Buying a franchise is a big decision that requires careful thought, research, and planning. By looking at multiple franchises, setting your priorities, determining your investment threshold, talking to existing franchise owners, and creating a solid business plan, you’ll be well on your way to making an informed and strategic choice.

Franchising can offer a fantastic opportunity for business ownership, but success hinges on doing your due diligence. By following these five steps, you’ll be in a better position to find the right franchise for you and ensure that your new business venture is a success