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What you need to research a franchise opportunity

On Behalf of | Jun 16, 2021 | Business Formation

If you choose to buy a franchise rather than starting a business from nothing, you have the ability to look before you leap and see how well the system works. Even though this is a key benefit, some franchisees fail to do their full due diligence.

There are two important sources of information that you should take full advantage of before you decide whether to sign an agreement.

The Franchise Disclosure Document

The Federal Trade Commission determined the things that a franchisee needs to know to have a fair chance at success and then mandated that the franchisor provide both the information and the time to review it. You will have a minimum of 14 calendar days to go over the Franchise Disclosure Document thoroughly but expect to spend more. According to, if the franchisor waits until the last minute before sending it to you, the company may be hiding something, as due diligence of the 200-page document can take several weeks.

Established franchisees

The franchisor is likely to give you a list of franchisees you may want to contact to learn more about what running the franchise is like and what issues they have had. They may be doing business in locations with similar demographics or have other traits that make them a good match for your questions. After you talk with these, do some research and speak to a few others, as well, just to make sure you are getting the big picture.

Franchisors should want franchisees that do the research and ask questions. While you are going through the process, expect a good parent company to be happy you are doing your homework and allow you time to get all the information you need to successfully run a business.