According to the International Franchise Association (IFA), Illinois is the fastest-growing state in franchising. The IFA’s recent 2023 Franchising Economic Outlook highlights the 10 fastest-growing states in terms of franchise establishments, franchise employment and franchise output—and Illinois tops the list in all three categories.
As a result, if you are thinking about buying a franchise in Illinois, you are not alone. The IFA’s report also indicates that 2023 may be a good year to buy, at least in certain industry sectors. Here, Illinois franchise attorney Jeffrey M. Goldstein breaks down some of the key steps in the process of pursuing a new franchise opportunity:
7 Key Considerations for Buying a Franchise in Illinois in 2023
1. Choosing Your Industry Sector
When narrowing down your options, the first step is to choose the industry sector you want to pursue. Many prospective franchisees begin their search with an industry sector already in mind—and this is fine, as long as you understand the risks involved.
For example, let’s say you are interested in starting a real estate franchise. Maybe you’ve been working as an agent for years and are ready to start your own brokerage, or maybe just have an interest in real estate and want to start out on your own. While buying a real estate franchise might seem like a good investment in 2023, according to the IFA’s data, the size of the franchised real estate sector is expected to decline over the remainder of the year.
Does this mean that you should focus on choosing a growing industry sector? Not necessarily. For example, while the IFA is projecting that quick service restaurants (QSRs) will see the most growth in 2023, not everyone is cut out to own a fast food restaurant. Ultimately, there are several factors to consider, and you need to make an informed decision based on your own interests, abilities and market analysis.
2. Choosing Your Target Franchise Concept
Once you choose the industry sector you want to pursue, the next step is to choose the specific franchise concept you want to target. Here, one of the first limiting factors will be whether the franchisor is registered to sell franchises in Illinois.
Illinois is one of the relatively few franchise registration states in the U.S. If a franchisor isn’t registered, it can’t sell you a franchise.
Ultimately, however, the franchisor’s registration status is just one of numerous factors you will need to consider. When choosing a franchise opportunity to target, it is important to conduct thorough due diligence and compare competing franchise opportunities so that you can arrive at an informed business decision.
3. Meeting with the Franchisor
After you do your research and choose a franchise opportunity that you want to pursue, one of the next steps is to meet with the franchisor’s representatives. This is often done during a “Discovery Day,” during which the franchisor invites multiple prospective franchisees to its headquarters for introductions and a Q&A session.
But, if you can, it is always a good idea to meet with the franchisor’s representatives on your own. Doing so will allow you to get all of your questions answered—and you may get more candid and comprehensive responses than you would get in a large group session. When meeting with the franchisor’s representatives, you will want to ask questions such as:
- What are the franchisor’s growth targets in Illinois?
- Is the franchisor planning any major system updates or overhauls?
- How is the franchisor planning to implement AI and other new technologies (and how much will these innovations cost franchisees)?
- Who will be your main point of contact as a franchisee in Illinois?
- Is the franchisor planning to direct advertising spend toward the Illinois market?
These are just examples. Buying a franchise is a long-term and high-risk investment, and you need to do everything you can to ensure that you are confident in your decision to move forward.
4. Carefully Review the FDD and Franchise Agreement
Along with asking questions, another important way to learn about a franchise opportunity is to carefully review the Franchise Disclosure Document (FDD) and franchise agreement. You should set aside some time to review these on your own, but you should hire an Illinois franchise attorney to conduct a franchise business review as well. Reviewing the FDD and franchise agreement on your own will help you decide what questions you need to ask, and hiring an attorney to review them will help ensure that you do not overlook any risks or red flags that are pertinent to your buying decision.
5. Selecting Your Location and Territory
Since Illinois is expected to see significant growth in both the total number of franchises and total franchise output, it will be important to strategically choose your location and territory. Territory rights are one aspect of the franchise relationship that are generally negotiable, and you will want to ensure that you are choosing a location and territory that provide you with a reasonable opportunity for success.
6. Carefully Choose Your Source of Financing
Just as you should carefully select your location and territory, you should also carefully select your source of financing. There are lots of options, some of which are more high-risk than others. When buying a franchise in a competitive market like Illinois, it is extremely important to ensure that if you lose your franchise, you will not also lose your personal savings.
7. Negotiating Your Franchise Agreement
Finally, given all of the various risks involved in buying a franchise in Illinois, you will most likely want to have an attorney negotiate your franchise agreement. An experienced Illinois franchise attorney will be able to help you choose which terms and conditions to negotiate, and then your lawyer will be able to negotiate for reasonable concessions on your behalf.
Schedule an Appointment with Illinois Franchise Attorney Jeffrey M. Goldstein
Are you thinking about buying a franchise in Illinois in 2023? If so, we encourage you to contact us for more information. To schedule an appointment with Illinois franchise attorney Jeffrey M. Goldstein, call 202-293-3947 or request a free consultation online today.