One of the reasons people are attracted to franchising is the opportunity to step into a business with an established model, systems, training, and support.

But a franchise is still a business, and not every franchise system succeeds.

Franchisors can struggle. Concepts can fail to gain traction. Leadership can change. Growth can happen too quickly. And in some cases, franchise systems disappear altogether.

There are never guarantees in business ownership, but good due diligence can help you identify warning signs before you make a major commitment.

Here are three areas I encourage prospective franchise owners to investigate carefully.

Tip #1: Understand the Stage of the Franchise System

Every franchise system starts somewhere.

Typically, a business develops a successful concept, proves the model and then begins expanding through franchising. As franchise locations open in different markets, the franchisor learns what works, what doesn’t and what needs to be refined.

The early stages can be especially important.

A young franchise system may still be learning how to recruit the right owners, support locations across multiple markets, generate leads consistently, train employees and build the infrastructure required for growth.

That doesn’t automatically make an emerging franchise a bad opportunity. In fact, getting into the right system early can sometimes offer advantages.

But it may involve more uncertainty.

If you are more risk-averse, you may be more comfortable investigating franchise systems that have already established a meaningful number of successful locations and demonstrated that the model can work across different owners and markets.

Historically, I have often used approximately 25 operating franchise locations as one useful benchmark when evaluating whether a system has moved beyond its earliest testing phase.

It isn’t a magic number.

What matters is understanding exactly where the franchisor is in its development and whether that stage aligns with your personal tolerance for risk.

Tip #2: Talk to Existing Franchise Owners

This may be one of the most important parts of your entire franchise investigation.

The Franchise Disclosure Document gives you valuable information about the franchise system. But existing franchise owners can tell you what it is actually like to operate the business.

Talk to a variety of franchisees, not just one or two.

Ask questions such as:

• Has the business met your expectations?
• Did the training prepare you to operate the business?
• How effective is the franchisor’s ongoing support?
• How well does the marketing generate customers?
• What surprised you after opening?
• What has been harder than expected?
• If you had the opportunity to make the decision again, would you still buy the franchise?

If the franchise makes a Financial Performance Representation in Item 19 of its FDD, you can also use your franchisee conversations to better understand the assumptions and operating realities behind those numbers.

Listen for patterns.

One unhappy franchisee does not necessarily indicate a problem. Likewise, one highly successful franchisee does not prove the system works for everyone.

Your goal is to understand the overall health of the franchisee community. Think of it as a Bell Curve.

Tip #3: Evaluate the People and Infrastructure Behind the Brand

A great concept isn’t enough.

You are buying into an organization that should be capable of supporting you for many years.

Take time to understand the people behind the franchise.

Who is leading the organization? How experienced is the leadership team? How strong are the training and operations departments? How many franchisees is each support person responsible for? Is the franchisor building infrastructure ahead of growth, or trying to catch up with it?

Pay particular attention to the people you will interact with after you become a franchisee.

Salespeople may introduce you to the opportunity, but the operations, training, marketing and support teams are the people who will help you build the business.

You want to know that they are experienced, accessible and genuinely focused on franchisee success.

The Bigger Picture

Choosing a franchise should never be about falling in love with a brand.

It should be about conducting a disciplined investigation.

Look at the maturity of the franchise system. Study the FDD. Talk to franchise owners. Understand the economics. Evaluate the leadership team and support infrastructure. And pay attention to what both the numbers and the people are telling you.

Franchising can reduce some of the uncertainty associated with starting a business from scratch, but it does not eliminate business risk.

The goal isn’t to find a franchise with no risk.

The goal is to understand the risks well enough to decide whether they are the right risks for you.

Ready to Learn How to Evaluate a Franchise?

At DreamMaker Franchising, we don’t start with the franchise. We start with YOU.

Through the DreamMaker Method™, we help aspiring business owners clarify what they want from ownership, identify opportunities that align with those goals and learn how to investigate them intelligently.

We educate. We guide. You decide.

Ready to start exploring? Schedule your complimentary DreamMaker 15-min Q&A Call and let’s talk about what the right business could look like for you.