Buying a franchise often seems like an easy path to owning a business. Yet many owners run out of money, discover too late the business wasn’t right for them, or end up managing an operation they don’t fully grasp. Experts say the difference lies in steps taken before signing the franchise agreement.
Know yourself before choosing
Nick Neonakis, CEO of The Franchise Consulting Company and author of The Franchise MBA, has worked in the industry for 24 years. He believes the most important part of franchise ownership starts with self-assessment, not brand research. Prospective buyers should first determine what they want the business to provide, both financially and personally.
Neonakis stated that the focus shouldn’t be on industry experience. Instead, buyers must consider whether they can handle the daily demands of the business. Many franchises depend on the owner’s ability to sell. New owners without sales experience often misjudge how central that role is—and later avoid it.
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Industry knowledge matters less than most assume. Neonakis cited a friend who owns several discount hair salons but doesn’t cut hair. That owner excels at hiring, managing, and expanding the business. The real key, he explained, is recognizing where you fit between hands-on operator and hands-off investor—and selecting a franchise that matches.
Turning research into action
Neonakis outlined a four-step process for franchise ownership. After self-assessment, the next step is identifying franchises where current owners already achieve the results the buyer wants. The third involves narrowing the list through detailed research until one or two strong options remain.
The final step, he emphasized, is shadowing an owner before committing. “If a company won’t allow this, I’d be very cautious about buying,” he said. The process should be thorough, not rushed. Legal and financial reviews come last but are essential. Neonakis advised working with an attorney who specializes in franchises, not a general lawyer. The International Franchise Association’s website offers a list of recognized franchise attorneys.
Once a buyer finds a promising candidate, the investigation must be driven by the buyer, not the franchisor. Salespeople are paid to sell, so their pitch will reflect that bias. Buyers should look beyond success stories and speak with franchisees who failed.
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Neonakis advised planning for 18 to 24 months before expecting consistent income. Funding is rarely the barrier buyers assume. SBA loans, franchise lenders, and retirement funds are all options. What matters most is the borrower’s credit score, not the brand. Buyers with strong credit can secure capital for a wide range of franchises, from a $10,000 service van to a multi-unit retail operation.
Neonakis’ message was clear: treat the investigation like a job. The choices made before signing determine everything that follows. If the process feels rushed or the franchisor resists scrutiny, that’s reason enough to walk away.
For those who do their due diligence, franchising can lead to the life they envision. It isn’t a shortcut. It’s a business that requires preparation, patience, and facing hard truths before spending a dime. Small retailers often face similar challenges when competing with larger chains, as smart promotions can make a significant difference.
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