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Franchises Under the Magnifying Glass

How to choose the right company and get resources to run your own business

5 Factors to Consider in Choosing a Franchise

En español

  1. Name recognition. Not all the more than 2,500 franchises in North America are household names. With some exceptions, the more well known the franchise, the more likely you'll have a ready-made customer base.

  2. Initial training. Most franchises offer comprehensive training to give you mastery over all aspects of the operation, including sales, management and the technical skills needed to run the business.

  3. Ongoing support. To find out if the corporate office is accessible and easy to work with, ask a current franchisee for the inside story.

  4. Return of investment. You'll be paying an upfront fee that can range from $5,000 to (much more likely) five or six figures. The conventional wisdom is that your franchise's annual pretax income should range from 30 to 50 percent of your total investment. Projected income is included in the Franchise Disclosure Document (see Red Flag #5).

  5. Flexibility. You're buying a formula — and the corporate office and your fellow franchisees expect you to follow it. Say you want to close your fast food place at 10 p.m., but the rules say you must stay open until 2 a.m. Some franchises allow some wiggle room; others don't.

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