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Four Things to Do Before You Buy a Franchise

Four Things to Do Before You Buy a Franchise

Here are four things you should do before you buy a franchise.

Buying a franchise can be a great way to go into business for yourself but not by yourself. It allows you to invest in an already established brand with a proven business model. While this backing can help improve your chances of success, a franchise is not merely a “business in a box.” There are multiple types of franchises and thousands of brands to choose from; all opportunities are not created equal. There are many important factors to consider to ensure you are able to maximize your business potential and achieve success. Here are four things to do before you buy a franchise to help you find the best fit for you.

Assess Yourself

Brand consistency across all locations is the lifeblood of a franchise network. As a result, there will be clear rules and well-defined processes and procedures to follow to ensure customers receive the proper brand experience. Consider your personality. If you prioritize creativity and flexibility, you might find it difficult to adhere to franchise guidelines and operate within a highly regulated system. The level of flexibility and autonomy varies from brand to brand, so be sure to take that into consideration. 

Also assess your strengths and weaknesses. Think about what you enjoy doing and what you find challenging. Be honest with yourself and consider how these factors will play into the business. 

What do you have experience in or what are you passionate about? Although you will have the opportunity to learn, it’s best to buy a franchise in a field you are familiar with. Take that a step further and compare different brands within the sector. Ultimately, make sure you understand what makes a franchise successful.

Do the Math

Start by calculating your net worth. Franchisors will use this indicator to determine if you have an adequate amount of capital to invest in your franchise. 

Next, understand all of the costs associated with starting a franchise. In addition to the upfront franchise fee, consider the cost of real estate, building modifications, equipment, inventory, payroll and utilities. Add in recurring fees as well, like royalty payments and contributions to the advertising fund. Refer to the FDD for a breakdown of initial fees, ongoing fees and an estimated total initial investment.

Once all costs have been identified, create a budget. Keep in mind it will take time for your business to become profitable. Talk to the franchisor and other franchisees in the network to get an idea of how long that may be and plan accordingly. 

Explore financing options. It’s often a good idea to borrow in order to conserve cash. Depending on your financial history, there are several options available such as an SBA loan, commercial loan, home equity loan, retirement plan or franchisor funding.

Keep Business and Personal Finances Separate

When starting a franchise, it’s imperative to keep your business and personal finances separate. Open a new bank account specifically for the business. Although it may seem easier to manage your finances from one shared account, it can quickly become an accounting and tax prep nightmare and could potentially expose you to higher risk. If all your money is in one account, a financial issue with the business could jeopardize your personal assets and vice versa.

As an added layer of protection, consider incorporating or forming an LLC for your franchise. This will create a separate entity for the business protecting you as an individual and shielding your personal assets in the event the franchise is sued or has debts collected.

In addition to protection, keeping business and personal finances separate also improves your professional image and makes it easier to determine the value of your business which is important for securing credit. It also aids in identifying tax deductions like writing off business expenses. 

Perform Due Diligence

Take the time to do your homework and research carefully. One of the most valuable sources of information for investigating a franchise opportunity is the FDD. This legal document is a gold mine of objective information to help inform your decision. In addition to the costs mentioned previously, it also contains details such as the company background, litigation and bankruptcy history, resource restrictions, support and training provided, financial statements and an outline of the franchisor’s obligations as well as the franchisee’s.

Consider hiring professional assistance. A franchise attorney can help interpret the details and an accountant can analyze the financials and aid in creating a budget.

Another great source of information is the franchise team itself as well as other franchisees in the network. Get to know the staff you’ll be working with and learn about the key franchisor executives. Talk to fellow franchisees to get a feel for their experience with the company, how satisfied they are with the franchise relationship and if they would do it again or recommend it to a family member. 

Starting a franchise is a major decision with many factors to consider. Before you sign on the dotted line, be sure to consider your interests, strengths and weaknesses, budget carefully, set up a separate bank account for the business and above all else perform due diligence to thoroughly vet the opportunity.

2023 Entrepreneur's Franchise 500 Top Rated for Veterans badge

We Proudly Support Our Veterans

Participating partners with the VetFran program, The UPS Store offers qualifying veterans $15,000 off their franchise fee to start their new business. To learn more, contact The UPS Store Franchise Development Team.

Entrepreneur's Franchise 500 Ranked #4 in 2023 badge

Ranked for over 30 Consecutive Years

The UPS Store has been ranked #1 in the postal and business services category for over 30 years and remains in the top 5 overall for the seventh consecutive year according to the Franchise 500 list.

Kristin Howard

Franchisee, Michigan

The reason my husband and I decided to go into franchising and specifically with The UPS Store, is the different opportunities we're given with the business. The UPS Store has name recognition as well as opportunities to expand.

Debbie Adams

Franchisee, Kentucky

What I enjoy most about being a The UPS Store owner is working with my customers. We are the solution specialists for our customers.

Jim George

Franchisee, Illinios

My favorite part about The UPS Store network is the camaraderie with other franchisees. Everybody loves to help everybody else. You’re really part of a family.

Greg Murray

Franchisee, Florida

The interesting thing about The UPS Store is that when a customer walks through the door there's an extremely high probability that they're coming there to do something that is important to them. So at the end of the day, what we do for customers is very important and they are trusting that we are going to do it well.

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Mariana Huberman

Franchisee, Washington, D.C.

One of the things that I love about The UPS Store franchise system is that you're not ever in this by yourself. The franchisees of The UPS Store network are great.

Heidi Morris

Franchisee, Colorado

The thing I enjoy most about being a The UPS Store franchisee is I get to get up, go to work and know that I'm helping other business owners succeed in what they're doing.

Bob Brown

Franchisee, Tennessee

Owning a The UPS Store franchise has changed my life because it's finally given me the opportunity to engage my customers and my staff and be able to take real pride in what I do. As a franchisee, we get faced with solving peoples' problems every day and we do everything we possibly can to try to help.

Marie Jensen

Franchisee, Oregon

My favorite thing about The UPS Store is the variety. I love the variety of customers, I love the variety of services; getting to know the customers, meeting their needs, finding out how we can help them accomplish what they need to accomplish and seeing how happy they are. That makes me ecstatic.

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Tad Mollnhauer

Franchisee, Florida

With the products and services that The UPS Store provides we can make a difference in people's lives and that is the best reason for being a The UPS Store owner.

Joy Batchelor

Franchisee, Idaho

What makes being a The UPS Store franchisee worthwhile at the end of the day is the customers. The customers treat us like we're family.

Paul Erchinger

Franchisee, Texas

One nice benefit of owning a The UPS Store franchise for me has been that it gives me the opportunity to be more involved in the community. As I make relationships with others it seems like no matter what the environment is, in one way or another business comes out of that and that's not my objective—it's been a secondary benefit to being involved in the community.

Chris Reminder

Franchisee, Ohio

There are several things that I really enjoy about being a The UPS Store franchisee. First and foremost it allows me to get to know the people in the local community and that is a lot of fun. We get to see people on a regular basis. We get to know their life stories. That's a lot of fun.

Bruce Jones

Franchisee, Kentucky

Since we have joined The UPS Store, our life has changed by just having more time to spend together as a family. We've been very fortunate with the stores that we have and we have a great staff that looks out for our best interest and we look out for theirs.

Lonnie Williams

Franchisee, Oklahoma

What makes The UPS Store so successful is it gives each individual an opportunity to grow with the network and just meet the challenges that are brought to them on a daily basis. Every day gives us a new opportunity to help another person, to help another small business, to answer a question and to solve a problem.

Jeff Graham

Franchisee, Alabama

I love my customers. I love my employees. I love every person, every face that comes into my store. I enjoy every day going into work and I can't see doing anything else for the rest of my life.

Stacie Stigar

Franchisee, Alaska

I think that this franchise is so successful because of all of the resources that are available to us as center owners—we have marketing materials, we have so many different opportunities for help from the home office, and it just really makes for a great franchise.

Don Pollard

Franchisee, New Jersey

I think the thing that makes this franchise successful is a number of things. First of all we have an outstanding system, we have a great product, a great brand, and we're able to attract dynamic people to run these centers and run the business. So I think when you put all that together it really provides for a winning combination.

Mary Ellen Nichols

Franchisee, Tennessee

The thing I love about the franchise is that you have the UPS name backing you but yet you also have the autonomy to make your own decisions to promote.

Laura Griffin

Franchisee, Florida

In the eight short months I've owned my The UPS Store it has really changed my life. I've gone from being an employee of someone else to being an employer of my associates. It's a big responsibility but it's exciting every day.

Sandy Scandrett

Franchisee, Wisconsin

Being a The UPS Store franchisee has improved every aspect of my life. It's very rewarding financially, professionally, and emotionally. I have a large number of regular customers who are really, really appreciative of everything we do.

Kristie Robison

Franchisee, Alabama

I would say owning a The UPS Store location has changed my life to where I have more time and flexibility. In owning your own business you get your store up and running and you get employees that you can trust that are going to help keep your store running. This allows me to attend my two boys' ball games and also travel and do things with them so it has really changed my life for the better.