Home / Blog / 5 Things NOT To Do When Buying a Franchise


5 Things NOT To Do When Buying a Franchise


Learn from others who have failed by avoiding these common mistakes.  Do the research properly and match the right business to your skills, investment capital, and lifestyle objectives.  Franchise ownership can be a great choice for many – but it’s not a guarantee of success.  Set yourself up for a positive outcome by doing things properly from the beginning. In no particular order, here’s my top 5 “What NOT to Do” :


  1. Fall in love with a business that you’ve been to – and decide to buy one.

A lot of people suffer from “love at first sight” by falling in love with a business that they’ve visited, and then they find out it’s a franchise. This is often the first franchise they’ve researched (and by research I mean they’ve eaten/shopped there), and think it would be great in their town.

There is confusion between a great business model and the RIGHT business model for you – based on your  lifestyle objectives, background, transferable skills and a host of other factors.

Going about franchise selection this way is somewhat backward.  Instead, speak to a professional consultant/broker who can guide you towards concepts based on your strengths and goals (not to mention being in your investment range) is a more logical approach.

If you have a franchise concept in mind, that’s OK – and a great place to start.  Just don’t forget to do your due diligence and honest self-evaluation from that starting place.


  1. Making a hasty decision without enough validation

Franchise validation is one of the key ways to evaluate franchise options.

During validation, you contact current franchise owners (the franchisees) and/or if possible, meet with some of them in person, to ask as many questions as possible. You will want to ask questions that will provide clarity as to what you should expect as a franchisee.

Some good topics to start with (after the basics of how long have you been open, etc.) would be:

  • What is the level of on-going training and support that is provided?
  • Are the marketing, advertising, and promotional programs effective?
  • What was your total investment – was it more or less than you expected and why?
  • How do you generate business (or leads)?
  • What do you do on a daily basis?

Then you can move on to the financial questions you really want to know, by asking permission to ask some money questions:

  • How long did it take before you were cash flowing on a monthly basis?
  • How long did it take for you to pull out a salary?
  • May I ask what your net profits were last year?

These questions will get you to a better understanding of the positive side of the business, but don’t forget to ask about the negative parts of the business too. It’s always better to be prepared, and to remember that no business is perfect – what are the things you won’t like about this one?


  1. When the perfect opportunity is staring you in the face – stall and do nothing

Fear can make the perfect opportunity slip away if you don’t act on it. Fear can sometimes get in the way of making a decision or taking action even after you’ve done your research.

At the end of the day, it comes down to trusting your instincts. You put yourself on this path (to becoming your own boss) for a reason. Ask yourself, if I do nothing – will my situation improve a year from now? There’s never a perfect time to start a business, but maybe this is the time for you to take a leap of faith and go for it.


  1. Cut corners, and save some money by not engaging professional help

People tend to make this mistake for many reasons. They might be feeling too strapped to outlay the additional cash required to hire a professional accountant or a lawyer – or they don’t feel the need. However, it is crucial that you hire a CPA/Accountant (preferably with a lot of franchise experience and clients) who can help you evaluate income projections and work with you to the numbers side of your business plan.

Similarly, a good franchise attorney (not your uncle Bob who drafts wills) will interpret the agreement you’re about to sign, and point out any red flags that you may want to try and get modified before you move forward.

So while working on your finances and figuring out your funding requirements, be sure to budget funds to hire professionals who will help you review the necessary documents to avoid making the worst mistake of your life.


  1. Fail to have appropriate capitalization

This common mistake can stem from not properly researching concepts or speaking with professionals to determine the true start-up costs you’ll need to open your business.

Being under capitalized could result in you not adequately marketing your business, resulting in a tepid launch – or worse.  Then down the road, you could run through your working capital before the business has had a chance to ramp up or cash flow. This results in you trying to raise money in a hurry – never at favorable rates.

All of these cautionary tales have actually been experienced by many business owners before you.  Learn from their mistakes and increase your chances for success.



Jane Stein is the founder of Your Franchise is Waiting, a consultancy firm for men and women exploring franchising as an alternative career path.

Leave a Reply

Your email address will not be published. Required fields are marked *