10 Nov Buying Into a Franchise? Here’s What Smart Owners Know
You’ve found a franchise that looks like the perfect opportunity.
In theory, it’s the best of both worlds: the freedom of owning your own business with the structure of a proven model.
But here’s where too many aspiring owners get tripped up:
They fall in love with the idea before understanding the reality.
The franchise world isn’t full of villains . . . most franchisors genuinely want their franchisees to succeed. But franchising is a business relationship, not a charity. Both sides have obligations, expectations, and fine print. And if you don’t understand those terms before signing, you could find yourself in a deal that doesn’t fit your goals, your finances, or your lifestyle.
It’s fine to get excited by the glossy brochures and website pictures and testimonials. But before you sign anything you need to do your due diligence.
Here’s how . . .
1. Start With the FDD. And Actually Read It
Every franchisor must provide a Franchise Disclosure Document (FDD) to anyone seriously considering a franchise.
It’s long (often 200+ pages), and yes, it’s written in legal language that makes most people’s eyes glaze over.
But inside those pages is everything you need to know about how the relationship works. The good, the bad, and the expensive.
The FDD is your roadmap. Learn to read it . . . or hire a lawyer who can translate it for you.
Pay close attention to:
- Fees: What you’ll pay upfront, monthly, and annually. Are there other required costs? Marketing, technology, renewal fees?
- Support and Training: What kind of guidance and resources does the franchise company provide, and for how long?
- Financial Performance: Are there earnings claims? How are they calculated, and are they realistic for your market?
- Franchisee Turnover: How many owners have left the system? A pattern of exits can signal deeper issues worth understanding.
The FDD doesn’t exist to scare you. It exists to help you make an informed decision. But it only works if you take the time to digest it.
2. Understand the Franchise Agreement (the Rulebook for Your Business)
The Franchise Agreement is the binding contract that you have with the franchise company. It governs nearly every aspect of how you’ll run the business. It’s absolutely critical you understand every provision of the agreement.
For starters, you’ll need to know:
- Term and Renewal: How long does the franchise last, and what happens when it expires?
- Territory Rights: Will you have an exclusive area, or can another location open nearby?
- Termination and Exit: What situations could end your franchise early? What’s the process if you want to sell later?
- Operational Standards: What flexibility do you have to innovate or make local decisions?
Your agreeing to the Franchise Agreement is the franchise company’s essential component to ensuring you maintain consistency and protect the franchise’s brand.
The key is to make sure those terms fit you: your capital, your goals, and your tolerance for structure.
3. Know Every Fee and When It’s Due
Franchising can be an efficient way to enter business ownership. But it’s rarely cheap.
Many new prospective franchise owners budget for the initial franchise fee and maybe the royalty percentage, but overlook the ongoing costs.
Common ones include:
- Marketing or brand fund contributions
- Technology and software fees
- Training or annual conference fees
- Supplier costs
- Renewal or transfer fees
Before signing, calculate your true cost of ownership: the monthly amount you’ll need to cover just to stay compliant.
Knowing this upfront prevents surprises later and helps you make sure the business model aligns with your financial goals.
4. Clarify Performance Expectations
Many franchise systems set minimum performance standards as a way to keep the system strong and consistent.
It’s essential to know what those numbers are and how they’re measured.
If the franchisor expects certain sales or production levels, ask:
- What happens if I fall short?
- Are there grace periods or support plans to help me improve?
- How do other franchisees in similar markets perform?
Understanding these benchmarks early helps you plan realistically. It also avoids surprises down the road if your territory has different market dynamics.
5. Define What “Support” Really Means
One of the biggest draws of franchising is the promise of support. But support comes in many forms, and it’s your responsibility to understand what’s actually included.
Ask detailed questions like:
- How is marketing handled? Will I get local advertising assistance, or just national campaigns?
- What kind of training is offered? And is it ongoing or only during startup?
- Do I have access to technical help or field reps if I hit operational challenges?
Most franchisors work hard to provide valuable systems and resources but every franchise is different. Clarity up front ensures you know what to expect and can plan accordingly.
6. Remember: “Buyer Beware” Is Not Cynicism. It’s Smart Business
Good franchisors want good franchisees: ones who do their homework, ask smart questions, and understand the business model before joining.
That’s how long-term partnerships are built.
But you can’t outsource that responsibility. No one will care about your investment as much as you do.
If you don’t understand a clause, ask.
If something doesn’t make sense financially, dig deeper.
If a promise isn’t written down, clarify it. Before you sign.
Protect Yourself Before You Commit
Buying a franchise can be an incredible opportunity. You get the benefits of a tested system and brand recognition . . . but only if you fully understand the agreement you’re stepping into.
At Garza Business & Estate Law, we help aspiring business owners decode the franchise opportunity, including the FDD and Franchise Agreement, so they can move forward with confidence.
We explain your obligations in plain English, highlight potential risks, and help you make sure the deal truly fits your goals.
We’re selective about who we work with. Each year, we partner with only a small number of business owners who are serious about protecting themselves and building something that lasts.
If you’re thinking about buying a franchise and want a clear understanding of the legal and financial realities before signing, apply to work with us here: