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The Dos and Don’ts of Buying a Franchise

Looking for a Profitable Small Business?

buying a franchiseOne of the most difficult aspects of becoming an entrepreneur is that you may not initially know exactly what you are doing. Let’s say for instance that you lost your job and have decided to venture out on your own, or you love flowers so have decided to become a florist, or whatever. In either situation, while you surely know a lot about the sort of business you want to start, you also probably know little about all of the other things that running a business entails: hiring and firing, law and taxes, marketing and advertising – those sorts of things.

That’s where buying a franchise comes in. A franchise is a brand, yes, but it is also a system, and a specific way of doing business. The great thing about a good franchise is that the entrepreneur who started the franchise created a successful business, and has reduced it into a repeatable system that, ideally, anyone can follow to get the same results. Most of the mistakes have already been made for you.

Think for a moment about McDonalds. Here is an incredibly popular business that is, by and large, run by teens and young adults. That is fairly amazing when you think about it. How does that happen? McDonalds created a business system that can be repeated by just about anyone, to get similar results in terms of food and profits.

Another thing is that a franchise like McDonalds offers its franchisees a lot of help. As Ray Kroc, founder of McDonalds (and franchising itself for that matter), said: When you own a franchise you are in business for yourself, but not by yourself. So if you buy a franchise instead of starting a business from scratch, you should get a lot of help, a valuable brand, and a success system.

Not All Franchises Are Created Equal

Notice I said, “should get.” The fact is, not all franchises are created equal. Some are better than others. So if you want to buy a franchise, and succeed in that business, here are some time-tested tips:

Do do your homework: The most important thing you can do when looking to buy a franchise is to speak with current and former franchisees. What you want to learn is:

  • How much does it cost to get into and run this business
  • What is it like to own this franchise
  • What is the franchisor like to work with
  • How much money can you reasonably expect to make

Franchisee lawsuits occur most often when franchisees believe they were mislead by the franchisor. By doing your homework first, you really will know what to expect.

Don’t fall under the ether: I know a real estate agent who says that once a client falls in love with a building or house, they “fall under the ether.” At that point, they stop making rational decisions. They have to have that building. My pal loves when they fall under the ether.

Don’t make that same mistake. Remain rational. Read the Franchise Disclosure Document (FDD) that the franchisor will give you. Make inquiries. Don’t fall under the ether.

Don’t go it alone: Buying a franchise is an expensive proposition, so don’t skimp. Hire a lawyer and accountant to help you go over the documents (business plan, operating agreement, etc.) and contracts.

Don’t expect to be an entrepreneur: As a franchisee, you have to do things the franchisor’s way. You will not be able to be as creative and free as if you were an independent entrepreneur. But the system is the system for a reason. It should work. Follow it.



Steven D. Strauss is the country's leading small business expert. An internationally recognized lawyer, columnist, and speaker, Steve is also an author of 15 books. Steve's highly syndicated business column, Ask an Expert, appears weekly at He is also the small business columnist for Microsoft, and AT&T who calls him "America's Small Business Expert."