Buying a franchise can be a great springboard to small business success, but there are no guarantees. Like any business, there are those franchisors that overstate how much training and guidance they will provide to newbies—and some are total scams. Make sure to do your research before leaping into franchising and use our tips to help.

Franchising Red Flags to Watch Out For

Check out all aspects of the franchising company you’re considering and look for these potential pitfalls:

  • Sparse training: Once you’ve bought in, franchisors often fail to provide enough in-depth training and/or mentorship from other successful franchisees. Evaluate how much training and support you’ll get.  
  • Stiff competition:  Franchisors should help you choose locations that aren’t cannibalizing its other outlets, but your territory may be smaller (or have less potential from profit) than you might expect. Other franchises in the same industry can also limit your franchising upside. The most crowded franchised industries are quick oil change companies, senior caregiving, and hospitality (motels). Make sure there’s room for your franchise to prosper!  
  • Micro-management: Some franchisors don’t really let you be your own boss. Each exerts a different amount or type of control. Make sure you’re comfortable with the restrictions.  
  • Confusing jargon: Make sure you understand everything you’re signing. Get the franchisor’s UFOC (Uniform Franchise Offering Circular) and pore over it. Go over all forms and seek advice from experts like an attorney and/or accountant (with franchise experience). 
  • Hard-sell: If the franchisor is trying to get you to sign in a hurry, it can be a bad sign. The franchisor’s pitch may only reveal the upside of the business. Make sure the franchise you choose is not a scam.  
  • Lack of (or bad) references: Examine disclosure documents carefully. Talk to franchisees who’ve left the business, and ask questions. Check the turnover figures, too.  

Remember to be as objective as possible when evaluating a franchise opportunity. Your due diligence will pay off and help you achieve franchising success.

Learn about your franchise funding options from the team at Whitefish Funding.