How to Research a Franchise Before You Buy

Deciding to purchase a franchise is a major financial and professional commitment.

Conducting thorough research is essential to ensure you're making a wise investment. This guide will walk you through the key steps to researching a franchise, from initial exploration to final verification.

1. A SWOT Analysis

When evaluating any new business opportunity, it's useful to conduct a SWOT analysis — an assessment of the Strengths, Weaknesses, Opportunities, and Threats of the business. 

• Strengths: What personal skills and experiences do you have that will support your success as a franchisee?

• Weaknesses: Identify areas where you might need extra support or training.

• Opportunities: What market opportunities exist for this franchise? Are there underserved customer needs you can meet?

• Threats: Consider external risks like economic downturns or market competition.

You want to keep these questions in mind as you explore available franchise opportunities. 

However, this analysis isn't just for the business itself; you should also assess your capabilities. See our blog posts “A Professional Audit: Building the Right Team for Your Franchise” and “A Personal Analysis: A Critical First Step to Choosing the Right Franchise Opportunity” for some questions to use to complete your analysis.

2. Where to Find Franchise Opportunities

Once you have a sense of what you’re looking for, it’s time to explore available franchise opportunities. Here are some of the best places to start your search:

Franchise Directories

• International Franchise Association (IFA): The IFA is a leading industry organization with a directory of over 1,400 franchises across 100+ industries.

• Franchising.com: This site allows you to search for franchise opportunities by location, industry, and investment level.

• Franchise.com: Similar to Franchising.com, this site offers a directory of franchise opportunities with search options by industry and location.

Franchise Expos & Magazines

• Franchising Magazine USA: This magazine offers practical advice for franchisees and has a franchise directory with keyword search functionality.

• International Franchise Expo: The IFA and the U.S. Department of Commerce sponsor this expo, which hosts events across the U.S., giving potential franchisees the chance to meet franchisors face-to-face.

3. Leverage Franchisee Support Resources

There are several organizations that provide valuable resources and advice as you research franchises.

• U.S. Small Business Administration (SBA): The SBA offers general guidance for entrepreneurs and specific advice for franchisees, including financial resources and loan information.

• American Association of Franchisees and Dealers (AAFD): The AAFD advocates for franchisee rights and offers education, support, and access to buying power initiatives.

These organizations can help you better understand your rights, obligations, and financing options as a franchisee.

4. Conduct Due Diligence on Your Top Franchise Options

Once you’ve identified a few promising franchise opportunities, it’s time to dig deeper. This process requires patience and thoroughness, but it’s essential to avoid costly mistakes. Here are the key steps in your due diligence:

A. Assess Franchise Value

Consider whether the franchise offers you a real advantage over starting a similar business on your own. Ask yourself:

• Does the franchise provide access to a better brand, faster startup, or marketing support?

• Will the franchise's resources help you achieve profitability faster than going it alone?

If the answer to these questions is no, it may not be worth paying the franchise fees.

B. Understand Differentiation

Look for what sets the franchise apart from competitors. Consider:

• What makes this brand unique?

• Is its success tied to a unique service, product, or customer experience?

• Can that competitive edge be sustained as new competitors enter the market?

Franchises that rely on "superior service" as their primary differentiator might face challenges if competitors can replicate that service.

C. Clarify the Division of Responsibility

Understand the division of roles between franchisor and franchisee. For example:

• What marketing or operational support does the franchisor provide?

• What responsibilities (like local marketing or hiring) are left to you as the franchisee?

Look closely at the Franchise Disclosure Document (FDD) to understand the specific roles and obligations.

D. Validate the Franchise with Current Franchisees

One of the most insightful steps in franchise research is speaking with existing franchisees. But don't just rely on the list provided by the franchisor. Instead:

• Randomly select franchisees and request a conversation.

• Ask franchisees about their experience — the good, the bad, and the unexpected.

• Inquire about their daily responsibilities, work-life balance, and profitability.

• Ask, "If you had to do it all over again, would you still buy this franchise?"

Hearing firsthand from existing franchisees will provide insight into the day-to-day reality of running the business and may highlight red flags that aren't obvious in the sales pitch.

For a full list of questions to ask franchisees, see our blog post “Don’t Skip This Step:  10 Critical Questions to Ask Franchisees Before Signing a Franchise Agreement.”

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5. Final Verification Before You Sign

If you've done your due diligence and feel confident in the franchise opportunity, it's time for one last step: the Discovery Day. This is a chance to meet the franchisor's senior leadership team and get a better feel for the company's culture. You'll be working with this team for years to come, so the cultural fit is just as important as the financials.

Prepare for Discovery Day

• Meet with Your Professional Team: Consult with your attorney, accountant, and financial advisor.

• Review the Franchise Disclosure Document (FDD) and Franchise Agreement: Your lawyer should conduct a full review of these legal documents and flag any areas for negotiation.

• Secure Financing: Meet with your lender to get pre-approved for a loan, so you're ready to move quickly after Discovery Day.

After Discovery Day

Once you meet with the franchisor and feel confident, it's time to move forward. If all goes well, you'll sign the Franchise Agreement and pay the initial fees. Be sure to have your legal professional present to review the final agreement before signing.

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Why Franchise Research Matters

Purchasing a franchise is a significant commitment — often requiring a 10-15 year agreement. The research process may feel long and arduous, but it is far better to spend weeks or months doing due diligence than to face years of regret over a bad decision. By using the resources listed above, conducting interviews, and consulting with your legal and financial team, you can approach your investment with confidence.

At Nebo Law Firm, we help franchisees navigate this process with trusted guidance on reviewing Franchise Disclosure Documents (FDDs), Franchise Agreements (FAs), and other essential contracts. Our experienced legal team provides clear guidance on your rights, obligations, and negotiation points before you sign on the dotted line.

If you're ready to take the next step or have questions about the process, contact us today. We're here to support you on your franchise journey!

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