10 tips for investing in a franchise

10 tips for investing in a franchise

By Joel Libava

With 3,000+ different options in the world of franchising, the following tips are a good starting point for those starting the process. Remember, knowledge is power!

1. Start your exploratory process by looking at what your business skills are. Are you great at sales and marketing, or operations? Are you a manager of people, or would you prefer having no employees?

2. Are you comfortable using someone else’s systems and procedures? Remember that franchising is a license that you purchase to have the right to use the system. Don’t invest in a franchise, if you won’t use the system. Start an independent business instead.

3. Do you have family support? Starting any business is a family decision. Family members must understand that there will be demands on your time, and that they will need to be supportive of your decision.

4. Do a net worth statement. Subtract all your liabilities from your assets. The difference is your net worth. In addition to the down payment required by lenders, do not forget about your living expenses during the start up period. You should have funds set aside for 6-12 months, while your business ramps up.

5. When you find some franchises that interest you, visit and talk to as many franchise owners as possible in those systems. Are you like them? Are they happy with their decision? Would they do it again?

6. Don’t rush the research process. Be thorough, and talk to both happy and UNHAPPY franchise owners. Be willing to discuss what you are hearing with the franchise company’s representative. See how they react to your questions.

7. Read through the Uniform Franchise Offering Circular {UFOC}. This is the required legal document that will be sent to you by the franchise company. Write questions down as you go, and be prepared to ask them to the franchise company representative.

8. When you have narrowed your search down to one opportunity, visit the franchise company’s headquarters. Meet the executive and support teams in person. These are your business partners.

A good franchise company is also checking you out. They want the right people for their franchise.

9. When you get back from your visit, go back through your notes, and see if you have missed something. If not, now is the time to have an attorney familiar with franchise law look over the franchise documents. The attorney should point out things you may have missed, and explain both party’s legal obligations. You should also have a CPA help you decide on a business structure for your company, if you decide to move forward, and go over financial information.

10. Gut check time. You have done the data collecting. You have met franchise owners. You have visited company headquarters. Does the opportunity “feel” right? If so, move forward. If it does not feel right, don’t do it. There will be other opportunities. Really.


ABOUT THE AUTHOR: Joel Libava, Franchise Selection Specialists Inc. 2nd generation President, brings real world franchise industry experience to his clients, coming from a franchise management background in the automobile and restaurant/hospitality industries. Website Blog

© Copyright Joel Libava. Used by Permission.

Contact Joel at or by calling 216-831-2610

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