Buying a franchise is an investment that requires informed and confident decision-making. If you are thinking about buying a franchise in 2026 and are new to the world of franchising, there is a lot you need to know. While buying a franchise can prove to be a profitable investment in the right circumstances, there are no guarantees. As a result, before you commit, it is critical to ensure that you have given due consideration to all of the risks involved. Learn more from national franchise lawyer Jeffrey M. Goldstein.
Choosing a Franchise Opportunity to Pursue
The journey toward buying a franchise starts with choosing a franchise opportunity to pursue. When you are thinking about investing in a franchise, it is important not to set your sights on one particular opportunity too soon. While you might be interested in one particular franchise initially, its competitors could offer more favorable terms, or there might be other reasons why a franchise opportunity isn’t as desirable as it initially seems. For example, as you do your research, you could uncover issues such as:
- Bankruptcy filings or litigation that suggest the franchisor is in a precarious financial position
- Lack of experience in franchising within the franchisor’s current leadership team
- Insufficient efforts to protect the franchise’s core trademarks and branding
- Franchisees who are dissatisfied with their investments
- A focus on growing the franchised brand in a particular geographic region nowhere near where you would be opening a franchise
Again, these are just examples. Once you sign a franchise agreement, you’re locked in, and ignoring any risks at the outset can put you at risk for facing significant financial losses. As a result, it is important to ensure that your search is sufficiently broad—that way, you won’t be tempted to commit to a franchise opportunity that may or may not be a viable option.
How do you find franchise opportunities to consider?
There are several ways to identify potential franchise opportunities. Along with reviewing lists like the Franchise Times’ “Top 400,” you can also do your own research—both in person and online. Keep in mind, these lists often only include franchisors that elect to participate, and some are pay-to-play. If you are looking at unconventional franchises, budget-friendly franchises, or franchises that seek to profit from a recent trend, there are some additional considerations you will want to take into account here as well.
Doing Your Due Diligence Before You Become Emotionally Invested
Once you have narrowed down your options, it is time to do your due diligence. It is important to do this before you become emotionally invested in a particular concept, as you still need to ensure that you are making a rational and informed decision.
There are several aspects to franchise due diligence. For example, to help ensure that you make a rational and informed decision, you will need to take steps such as:
- Talking to current and former franchisees (here are some questions you can ask)
- Talking to the franchisor’s representatives and attending a discovery day
- Setting aside several hours to review the Franchise Disclosure Document (FDD) and franchise agreement
- Comparing the key terms in the FDD and franchise agreement to those offered by other franchisors in the same industry
- Completing your pro forma and conducting a realistic assessment of the financial viability of the franchise in your location
Here, too, these are just examples. Due diligence is a complex and time-consuming process. However, it is also an extremely important process, and if you take shortcuts, you could find yourself facing adverse financial consequences for years to come.
Making Sure You Know the Terms of Your Franchise Agreement
While it is important that you review the FDD and franchise agreement for each franchise opportunity that you are seriously considering, once you pick the one franchise you want to pursue, it is important that you hire a franchise lawyer to review the FDD and franchise agreement as well.
A seasoned franchise lawyer will be able to provide insights that only come with experience, and will be able to evaluate the key terms of the franchise agreement in light of both the governing law and relevant industry standards. Your lawyer will be able to help ensure that you understand all of the legal and financial risks involved, and will be able to advise you regarding whether any negotiations are warranted.
Even though franchisors often suggest (either explicitly or implicitly) that they offer their franchise agreements on a take-it-or-leave-it basis, most good franchisors will be willing to negotiate—at least a little bit. They will know if any provisions of their franchise agreements are unreasonably one-sided, and they will be willing to make reasonable concessions in order to retain strong franchise candidates.
Making Sure You Are Giving Yourself a Reasonable Chance of Success
Before you commit to moving forward, you should also take a variety of other steps to help make sure you are giving yourself a reasonable chance of success. Among other things, this means ensuring that you are giving due consideration to factors such as:
- Your source of financing
- How long it will take to open for business
- How long it will take to become profitable
- Whether you have the financial reserves needed to weather the opening phase
- Whether you are comfortable operating your business within the confines of the franchise model
The more consideration you give to these types of factors, the more confident you will feel in your final decision. While there is no way to guarantee that your franchise will be successful, you can—and should—do what you can to give yourself the best chance possible.
Schedule a Free Consultation with National Franchise Lawyer Jeffrey M. Goldstein
Are you thinking about buying a franchise in 2026? If so, national franchise lawyer Jeffrey M. Goldstein can help you make an informed buying decision. To get started with a free consultation, please call 202-293-3947 or tell us how we can help online today.
