If it’s your first time evaluating a franchise, you may not know exactly what to expect. Franchise ownership presents a seemingly low-risk, high-reward opportunity, but it can be a daunting process, especially if you’re not familiar with the franchising industry. However, there are certain pitfalls you should avoid when buying a franchise to ensure that you make a well-informed decision.

While many franchise systems offer solid support structures, clear guidance, and opportunities for growth, taking the plunge can still be fraught with challenges. Why do some franchisees fail while others flourish? In this deep dive, we'll explore the top "don'ts" for those on their way to becoming franchise owners.

Common Mistakes Aspiring Franchisees Should Avoid

1).   Avoiding the Sales Rep. You may be wary of speaking to franchise sales representatives or avoid their calls. After all, in the age of the internet, can’t you just find all the information you need online? Not entirely. There’s a lot of information online, but usually the most important information is kept confidential by the franchise company and only shared with qualified franchise candidates. The brand needs to qualify you first, and that’s the primary role of the sales rep.

The Fix: It’s best to spend 15 minutes on the phone with an expert on the brand before you spend hours of your time searching the depths of the internet. It will save you and the franchise time by going directly to the source.

‍

2). Stopping Before You Get Started. Franchising is a long term business relationship and franchise brands are not expecting you to make any decisions early on in the process. In fact, in the world of franchising, it would be illegal to do so. There’s a document called a Franchise Disclosure Document that the franchisor must provide to you a minimum of 14 days prior to signing a contract. This means there’s a lengthy due diligence process (typically 30 to 60 days) where you’ll be receiving lots of information. In order to get access to the detailed information you need to truly assess the opportunity, the franchisor will ask a simple request of you.

Franchisors often ask for an application to kick off the process. Think of the application like a gatekeeper. Your information is kept confidential and there’s no obligation or expectation that you’ll purchase a franchise. After all, you have to qualify and be approved as a franchisee. But the information behind the gates is worth protecting, and brands want to make sure that only truly qualified candidates get access. Pretty fair.  

The Fix: Don’t get scared off by the application. It doesn’t obligate you to anything at all so there’s no risk for you. It simply shows a franchisor that you’re qualified and worth their risk of exposing you to confidential information while investing time and resources into your education.

‍

3). Going Outside of the Process. If it isn’t clear yet, franchisors are assessing your ability to successfully represent their cherished brand. One of the factors they consider is whether or not you’re able to follow a simple process. Going outside of that process in any way can negatively affect your chances of being selected as a franchisee.  

The Fix: Believe it or not, the process is actually designed with the purpose of facilitating learning for potential franchisees. Stick to the process and you’ll experience the most efficient learning process possible, which will lead you to making an educated decision, whether it’s a yes or a no.

A typical process shouldn’t cost you any money until you go to Discovery Day (explained below). Even then, it should only be your travel costs. It will probably look something like this:

1. Initial call with brand development representative (15-30 min)
2. You’ll complete the application (or Request for Consideration)
3. You’ll receive the Franchise Disclosure Document (Read about this here)
4. You’ll review the FDD with a more senior development manager or director
5. You’ll likely get an opportunity to speak with franchisees that were once in your shoes, trying to decide if this is the right franchise for them
6. You’ll attend Discovery Day at the brand’s HQ, where you’ll meet everyone you’ve been working with in the process, as well as founders and executives. This is the step where final approval would be issued for both parties.
7. If you’re approved by the franchisor and you also love the franchise opportunity, you’ll sign a franchise agreement and pay the franchise fee.

‍

4). Not Doing Your Due Diligence. Many prospective franchisees hurry through the franchise ownership process, eager to begin operations and capitalize on a hot new brand. This impatience often leads to a lack of thorough investigation into the market, the brand's reputation, and the in-depth analysis of the franchise disclosure document (FDD). An FDD is a goldmine of crucial info, from litigation history to franchisee financial performance representations (FPRs) — it's the blueprint of what you're getting into!

The Fix: Take the time you need to fully review the FDD and ask the questions you need. Without a careful reading and review of this document, you're operating in the dark, and this lack of understanding can end up being costly. Franchising might seem like a fast track to business ownership, but any savvy investor will tell you that due diligence is key.

‍

5). Not Outlining Your Business Goals and Expectations. Why are you getting into franchising? The answer might seem obvious — to make money, right? However, it's essential to have a crystal-clear vision of your goals and expectations. For some, the main goal is to run a lifestyle business they’re passionate about. For others, it might be to grow and sell. Without this clarity, you risk a misalignment between the franchisor’s vision and your own, which can lead to dissatisfaction, burnout, and financial setbacks.

The Fix: Take the time to develop a comprehensive business plan that articulates your objectives, your target market, and the roles and responsibilities of everyone — employees, franchisor, and you, the franchisee — involved in this venture.

How to Embrace the Process of Buying a Franchise

Navigating the franchise landscape is complicated, but by steering clear of these common missteps, you'll be better positioned to turn your franchise ownership into a fulfilling and profitable venture. Franchising isn't just about following the rules; it's about making informed decisions, adapting to change, and fostering relationships with potential brands. Whether you're a newbie to the franchising world or a seasoned multi-unit owner, these principles will help guide you as you chart your course into business ownership.

The FTC offers A Consumer’s Guide to Buying a Franchise, which is worth reading, but here’s a plain English guide written by franchise experts with more than two decades of combined experience.