Want to know how to research franchises? In this article we show you the six main steps to do franchise research and make the best choice for you. These research techniques can be done inexpensively by any professional or entrepreneur. If you have the will, we’ll show you the way.
Before you begin researching specific franchise brands, however, step back and educate yourself about franchise ownership and business ownership in general. If you’ve been an employee all your life, owning a business requires a mindset shift. Also, you must feel comfortable with the franchise business model and know how a franchise works. Form a clear picture in your mind of the roles of the franchisor vs franchisee. See our Franchise Guide for more.
How to Research a Franchise – In 6 Steps
The following steps are in sequential order. In practice, prospective franchisees like you may be involved in multiple steps concurrently. Some franchisors have their own process and the order may vary somewhat depending on the franchise. That’s fine. This is meant as a guideline and starting point, only.
Here is how to research a franchise:
1. Conduct Market Research
This first step is to explore what’s out there for franchise opportunities. The sky’s the limit — at least at first. The purpose here is to review a lot of information in order to identify possibilities, including industries and franchises you want to learn more about.
- Perform internet research — Search engines like Google and Bing help you find websites and pages that collect franchise information. Look for your perfect business opportunity by size, industry, investments required, and other criteria. See our section listing 70+ different types of: franchise opportunities.
- Consider attending franchise expos — Organizations like the International Franchise Association (IFA) and National Event Management hold franchise industry shows in the U.S. and Canada. Expos are opportunities to understand the franchise model. One reason to attend is to connect with and initiate communications with franchisors. You can also learn about the franchising industry. These events can be in person or virtual. See: IFEInfo.com and FranchiseShowInfo.com.
- Decide whether to use a franchise consultant — Somewhere along the way online, you are bound to encounter franchise consultants and advisors. Franchise experts can save you time, help focus your search, and prevent expensive mistakes. But it’s completely possible to do research on your own without their expertise.
2. Narrow Down Franchise Brands
The next step is to explore specific brands. This is a “narrowing down” phase. Buying into a franchise opportunity means using the franchisor name and trademarks. Prospective franchisees need to believe in the franchise brand they ultimately operate under. At this point you’re looking for reasons to exclude a particular franchisor or put the brand on your short list of picks.
- Investigate selected franchises — As your research uncovers specific brands that look interesting, visit the individual franchisor websites. Read their materials online. You will get the positive story from franchisors. To get a balanced view, read a franchise forum like The Unhappy Franchisee for feedback and reviews. Everything in such a forum isn’t necessarily correct, but does give more data points.
- Conduct phone calls — Start holding introductory phone calls with franchisors. If you request information from franchisor websites online, you will get a follow-up phone call. The person you will deal with is called a franchise development representative — someone who works for the franchisor. Some franchisors, such as 7-Eleven, also offer informational seminars you can attend in a city near you or online.
- Organize and analyze data — Make sure to track the information you learn. Separate which franchise businesses seem like a fit for your goals. Use a notebook or our free Franchise Comparison Worksheet.
3. Apply to Franchises
At this stage you should have narrowed your focus to specific franchise companies you are interested in. By this point you also should be investigating franchise financing options for where to get the money and discern whether the franchise business is a fit for you financially.
- Fill out the application — At some point most franchisors require prospective franchisees to formally apply in order to go further. Subway, Papa John’s and McDonald’s are just a few that have online application forms for prospective franchisees.
- Provide confidential information — Calculate your net worth and gather financial information – you will be asked for it. You may even be asked to take a survey or profile assessment. This helps the franchisor determine how well your personality, interests, skills and financial circumstances match those of successful franchisees.
- Consent to a background check — The franchisor will also seek permission to conduct a background check and credit check. Sometimes you grant permission as part of completing the online form.
In other words, the franchisor needs to “qualify” prospective franchisees. The franchisor will then tell you if you have the desired qualifications, experience and skill sets to move forward.
4. Do Due Diligence
This is the step where you get even more serious about in-depth investigation and learn what you will have to commit to with a franchise brand. Expect to take 30 to 45 days for this phase.
- Review the Franchise Disclosure Document — Along the way you will receive a FDD from the franchisor. Expect hundreds of pages of information outlining the franchise system. This document covers fees, royalties, costs, training, marketing, products, technology, support, competition and more.
- Interview Franchisees — Make sure to talk to several existing franchisees, as many as 10 or 12. Visit at least one or two franchise owners in person for an entire day if possible. See: Questions to Ask Franchisees.
- Run Financial Projections — By now you have enough context and numbers to start testing them. Build sales, cost and financial projections and rough out a business plan.
5. Visit Franchise HQ
If things progress positively on both sides, a key step is an in-person visit to franchise headquarters called Discovery Day. This visit is by invitation only. It’s a great opportunity for prospective franchisees.
- Attend only if serious — Have you received an invitation to attend a Franchise Discovery Day? You should only attend if you are leaning toward this particular franchise being the one for you.
- Ask questions — Candidates get to meet the franchisor executives. Get answers to any important question not answered so far. See: Questions to Ask Franchisors.
- Get comfortable — On this visit, candidates get a better feel for whether they want to be in a long term relationship with the franchisor. Trust your intuition. If it feels wrong, you should listen.
Bottom line: by the end of this phase, prospective franchisees should have enough information to understand the business model and what will be required. You’re then ready to move on to the decision phase.
6. Make a Decision
If all goes well, you will be told that the franchisor wants YOU as one of its franchisees. You will be excited. You may be presented with a contract that day or shortly thereafter. Things could come together quickly.
But you still have some very important work do before buying a franchise and becoming a small business owner.
- Review the contract — Don’t rush. Take your time to review the franchise agreement. It covers important things like territory rights, services and resources you can expect. Talk it over with your spouse. There is no advantage to rushing. You’ll be in a relationship for 10+ years.
- Seek legal advice — Consult with a franchise attorney who can help you understand legal details and minimize risk. Clarify any points raised by your legal and financial advisors and spouse. Negotiate what you can. Read: The Importance of Hiring a Franchise Attorney.
- Finalize your financing — Now is the time to finalize the financing options you’ve been exploring. You’ll need the capital to conclude the transaction and operate your new franchise business.
After you’ve resolved any contractual questions, you sign the contract. Money also changes hands.
Congratulations! You now are one of the franchisor’s newest franchise owners.
It may seem like you’re done. But you are only just beginning. You now have a grand opening to focus on, a business to run — and a future to create.
How Long Does it Take to Do Franchise Research?
It is possible to research franchises in approximately 90 days. Times vary, however. For you it could be as short as 60 days, or it may take 6 months. It all depends on the pace you set, including factors such as: how much time you can devote to research, how soon you get invited to visit the franchisor’s headquarters, how long it takes you to review the documentation, and how quickly you make decisions.
Are Franchises a Good Idea?
You will know if buying a franchise is a good idea once you start to research the franchise world. Research takes commitment, but if you don’t have an idea for a business from scratch, then looking at franchise companies is a good alternative.
How Do I Research a Franchise?
Thoroughly and confidently. According to franchise expert Joel Libava, it’s important to be confident and information gives you that confidence. “Lean into it. When you ‘own’ the entire research process your confidence grows. By doing thorough research you become more confident, thereby increasing your odds of success as a franchise owner,” he advises. Libava also has written a book on the topic.