Franchise Requirements You Need to Know About

Buying a franchise is a great option for aspiring business owners since it comes with an already proven business model. There are various things to consider when deciding whether to buy a franchise vs. start a business from scratch, but buying a franchise certainly gives you a head start as a business owner. 

However, not all franchises are the same, and they will all have unique requirements and expectations of their franchisees. As you research which franchise best fits your goals and abilities, it’s crucial to understand their specific requirements before entering into a franchise agreement. It’s recommended that you thoroughly research the franchise while consulting with legal and financial advisors so that you’re able to make an informed decision that benefits you in the long run. A FranNet franchise consultant is also a valuable resource that will help you make an informed decision.  

6 Franchise Requirements to Consider Before Buying a Franchise 

While each franchise will vary in the specifics, you should consider the following requirements before signing a franchise agreement: 

#1 – Financial Requirements 

All franchises will have financial requirements from one degree to another that a prospective franchisee must meet to be eligible to buy the franchise. These include the following: 

Make sure you research the exact requirements of the franchises you’re interested in so you can know if it’s a good fit. 

Keep in mind that you will also need to create a thorough and effective business plan in order to secure the necessary financing from a lender to buy a franchise. 

#2 – Legal and Contractual Obligations 

The franchise agreement is a legally binding contract between a franchisor and a franchisee. It outlines the terms and conditions under which the franchisee can operate, using the franchisor’s brand, trademarks, and business model. The terms and conditions laid out in the agreement will vary with each franchise but often include the following:  

  • Grant of Franchise – This specifies the franchisee’s rights when it comes to the use of trademarks, branding, and the franchisor’s system. 
  • Territory Restrictions – This section will define the geographic area in which a franchisee can operate.
  • Renewal and Termination Clauses – These will outline the duration of the franchise agreement, the conditions for renewal, and the conditions under which either party can terminate the agreement.   
  • Non-Compete and Confidentiality Agreements – This refers to restricting a franchisee from operating a similar business within a certain geographic area, as well as, the confidentiality requirements meant to protect proprietary information.
  • Operation and Quality Standards – This section will cover aspects such as product quality, service standards, and adherence to the franchisor’s operating procedures.   

#3 – Training Programs 

The duration of the training provided will vary, and it could include classroom instruction, on-the-job training, online modules, and hands-on experience. It includes the initial training for franchisees, as well as, ongoing support and training opportunities. Whether the training programs last a few weeks or several months, you will want to know exactly what the franchise will expect from you. Ultimately, the franchise’s goal is to make sure their franchisees are equipped to run the business successfully while adhering to the standards and values of the brand. 

#4 – Site Selection and Approval 

When starting a franchise business, you won’t be able to choose just any location. It will need to meet your franchise’s criteria, which factor in demographic analysis, market research, accessibility and visibility, zoning regulations, territorial concerns, site size, cost considerations, and more. Even once a site is approved, you will need to complete lease negotiations and meet the terms of the lease.  

#5 – Marketing and Branding 

Every franchise will have their own marketing and branding strategies that you will need to adhere to as a franchisee. These include requirements related to local and national marketing campaigns, branding guidelines and standards, and cooperative advertising programs. These requirements make it possible to maintain consistency in the marketing and branding across all franchise locations, which is essential to a strong and recognizable brand

#6 – Performance Metrics and Reporting 

Measuring the financial, operational, and marketing performance of individual franchise units allows a franchise to assess the health and success of their franchise system. While reporting requirements will vary with each franchise, the following is typically outlined in the franchise agreement:

  • Sales and financial reporting requirements 
  • Key performance indicators (KPIs) 
  • Consequences for not meeting performance standards 

Ready to Get Started on Your Franchise Journey?

Are you ready to buy a franchise? FranNet’s Entrepreneur Readiness Assessment is a good place to start. Our expert franchise consultants can evaluate your goals and abilities and find a franchise that fits. We have a directory with hundreds of verified brands. Our team will guide you through the process from start to finish and provide you with everything you need to make an informed decision. All of this comes at no cost to you. Schedule your free consultation today to get started! 


Nov 30, 2023