With a new year just around the corner, now is a time when many people are thinking about making some significant changes in their lives. For some, this means considering a franchise opportunity. If you are thinking about buying a franchise in 2025, what do you need to know? Keep reading to learn about some key legal, financial, and practical considerations from New York franchise lawyer Jeffrey M. Goldstein.
What You Need to Know if You Are Thinking About Buying a Franchise in 2025
While buying a franchise presents opportunities, it also presents risks. In fact, the risks of franchise ownership can be severe. If your franchise fails for any reason, not only will you lose your initial investment, but you could find yourself facing ongoing liability for your franchisor’s “lost future earnings.” Former franchisees will typically be subject to post-termination covenants as well, and these covenants can significantly limit their business prospects going forward.
Taking these risks into account, how can you ensure that you are making an informed decision before you sign a franchise agreement? Whether you are thinking about buying a franchise in New York or anywhere else, here are some of the most important considerations you will want to keep in mind:
1. Have You Done Your Due Diligence?
Before you commit to buying a franchise, you need to do your due diligence. Even if you aren’t planning to buy until sometime next year, your due diligence should start now.
Why? Because conducting due diligence is (or should be) a time-intensive process. You also need to give yourself time to consider alternate franchise opportunities if your due diligence efforts reveal that your first choice isn’t viable. We’ve written lots of articles on due diligence, and we encourage you to read them before you start the process.
2. Have You Considered All of Your Financing Options?
If you move forward with buying a franchise in 2025, how will you finance your purchase? Are you planning on taking out an SBA loan or seeking conventional financing? Do you qualify for veteran financing? Are you planning to borrow against your home or pull from retirement savings? These are just some of the options that are available.
Just as your mortgage rate can have a major impact on your personal finances, the interest rate for your business loan or home equity line can have a major impact on your franchise’s cash flow. As a result, it is important to make sure you give due consideration to all of the financing options that are available.
3. What is Your Business Plan?
As a franchisee, you will be responsible for your own success. While you will be able to rely on the franchisor’s system and branding—and while you will need to comply with all of the franchisor’s system standards to remain in compliance with your franchise agreement—your success or failure will ultimately be up to you.
With this in mind, you need to have a business plan—just like any other business owner. How will you use the franchisor’s system and branding to build a profitable business? If your answer to this question is, “I don’t know,” then you might not be ready to move forward.
4. Have You Considered Other Franchise Opportunities?
If you are like many people who are thinking about buying a franchise in 2025, your interest may be driven primarily by an affinity for a particular franchise concept. While this is totally fine, it is important not to limit your focus before you have considered the other options that are available. Once you start looking, you may find that other types of franchises are more desirable for a variety of different reasons. Or, you may find that a competing brand offers a more complete system and more favorable terms than the brand you are currently considering.
5. Are the Terms of the Franchise Agreement Reasonable?
Speaking of terms, at some point, you will need to sit down and read the franchise agreement. Even if you hire a New York franchise lawyer to review the Franchise Disclosure Document (FDD) and franchise agreement for you (which you should), you should carefully review these documents yourself as well. If anything stands out as particularly concerning or unreasonable, you should write it down to discuss with your lawyer during your free initial consultation.
6. What Do Franchisees (Both Current and Former) Have to Say?
When you start to get serious about buying a franchise, you will want to spend some time spending with several current and former franchisees. These individuals were in your shoes previously, and most of them will be more than happy to speak with you.
The insights you gain from current and former franchisees can be invaluable, and the information they are willing to share in confidence could be vastly different from what you hear from the franchisor or what you find online. While it is ultimately up to you to make your own informed decision, these can be some of the most important discussions you have during the franchise buying process.
7. Do You Have Relevant Skills, and Are You Confident in Your Chances of Success?
Finally, it is important to realistically assess whether you have the skills and drive needed to succeed as a franchisee. As a franchisee, you cannot expect the franchisor to hold your hand, and you cannot expect the franchisor to come to the rescue if you are struggling. If you are confident in your abilities, if you have done your due diligence, and if you are prepared to take responsibility for your business, then the next step is to discuss your franchise opportunity with an experienced New York franchise lawyer.
Schedule a Call with New York Franchise Lawyer Jeffrey M. Goldstein
Are you thinking about buying a franchise in 2025? If so, we invite you to contact us for more information. To schedule a call with New York franchise lawyer Jeffrey M. Goldstein, please call 202-293-3947 or request a free consultation online today.
