3 Things You Can Do to Reduce Your Risk When Buying a Franchise

There’s risk associated with buying a franchise. Don’t let anyone tell you there’s not.

You’re putting some of your hard-earned money on the line in order to be your own boss. There’s no guarantee your franchise business will be a successful one.

But, there are things you can do to reduce your risk before you take your checkbook out. I’m going to share 3 of them with you.

Watch the Trends

Before you embark on your search for a great franchise opportunity, you should have a good idea of what the current trends in franchising-and small business are. In other words, be a trend-watcher. I have a couple of ways for you to do it.

  1. Set up a few Google Alerts.

To set these up, all you need is a free Google account. Once you’re signed in, go to Google Alerts, and create a few of them, so you can be alerted via email when the topics you’re interested in receive a mention online.


  • “franchise trends”
  • “what’s hot in franchising”
  • “new franchise opportunities”
  • “trends in franchising”

Once you have those setup, subscribe to get new blog posts from the following online publications:

The writers at these publications are good at spotting trends and writing about them. They make it easy for you to keep your eye on what’s new. You need to see what people are talking about. You can lower your risk and increase your chances of success if you can get in on the ground floor of a franchise that’s aiming squarely at both current and up and coming trends.

Determine Your Budget

You need to come up with a number. This number should be the maximum amount of money you’d be willing to put on the line in order to be your own boss. Call it your maximum total investment.

To do that-to figure out the top-end of what you’re willing to invest in a franchise, you need to determine your net worth. Have you done that yet?

If you know your net worth, great. If not, you can use the free net worth calculator a friend of mine (who’s a coder) put together. It’s crucial to know exactly where you stand financially before you start doing a serious search for a franchise.

Once you have come up with your net worth, it’s up to you to figure out what you’re comfortable investing and where the money is going to come from. Seeing your financials in black and white makes this exercise much easier to do.

Important: I’m not a financial expert. If you need help figuring out how much money you may want to risk, sit down with a financial planner and go through a few scenarios.

You can lower your risk substantially by doing things right at the beginning. Like coming up with a budget for your potential franchise business that won’t put too much of your assets at risk.

Meet the People at Franchise Headquarters

If at all possible, visit franchise headquarters in-person, so you can meet the executive team-and some of the employees.

It’s one thing to have a video-conference via Skype with your franchise representative; it’s quite another to shake a few hands and engage in face-to-face conversations with the folks you’ll be interacting with once you get your franchise business up and running.

The only way that you’re going to be able to good sense of the operation is by meeting the entire team in-person.

Fact: Most franchisors put on what’s often called a Discovery Day. It’s an event put on by franchise headquarters for people who are interested in learning more about the operation. It’s usually reserved for serious franchisee prospects-ones who have been financially vetted and are getting close to making a yes or no decision on whether to become a franchisee or not.

Making an in-person visit is a great way to lower your risk when buying a franchise. Not only does it enable you to see the business-behind the scenes in real-time, it allows you to get a feel of what the company culture is like. You’ll also be able to determine if the company is for real, and if they seem to have the capacity (and the personnel) to support you as an owner.

It’s important to do whatever you can to lower your risk when buying a franchise. The tips I shared will help you do just that.

The Franchise King®, Joel Libava, is the author of Become A Franchise Owner! The Startup Guide to Lowering Risk, Making Money, And Owning What You Do. He also owns and operates Franchise Business University, which offers invaluable online franchise courses


Previous ArticleNext Article
Send this to a friend