What Are the Requirements to Becoming a Franchise Owner?

Updated August 2025

If you’ve ever wondered how to become a franchise owner, you’re not alone. Every year,  thousands of entrepreneurs choose franchising over starting a business scratch because it blends independence with the support of an established brand. But before you can open your doors, you’ll need to meet specific franchise requirements.

From financial qualifications to legal obligations and personal traits, understanding these requirements is the first step toward successful franchise ownership. This guide breaks down what franchisors look for—and what you should prepare for.

Financial Requirements

One of the biggest hurdles to franchising is meeting the financial benchmarks set by franchisors. These can vary by brand and industry, but most fall into the following categories:

• Initial Franchise Fee – A one-time payment that secures your rights to use the franchisor’s brand, systems, and intellectual property.
• Estimated Initial Investment – Beyond the franchise fee, you’ll need capital to cover startup expenses such as equipment, buildout, signage, training, and working capital until the business turns profitable.
• Upfront Cash Requirement – Many franchisors require that 25–30% of the total investment come from your own liquid assets, with the remainder eligible for financing.
• Minimum Net Worth and Liquid Capital – Franchisors set thresholds to ensure you have the overall financial strength and available cash to fund operations.
• Royalties and Advertising Fees – Ongoing monthly royalties (a percentage of sales or flat fee) plus contributions to national or local advertising funds.
• Additional Costs – Depending on the franchise, you may also need to budget for security deposits, leasehold improvements, insurance, technology systems, inventory, and participation in co-op marketing programs.

Pro Tip: Review the Franchise Disclosure Document (FDD) carefully. The FTC requires franchisors to disclose all fees and financial obligations in this document. It’s wise to have an accountant and franchise attorney review the FDD before you sign.

Legal & Contractual Obligations

Franchising is built on a legal framework. When you sign a franchise agreement, you’re entering a binding contract that lays out your rights and responsibilities. Key provisions typically include:

• Grant of Franchise – Defines your right to use the franchisor’s trademarks, logos, and operating system.
• Territory Rights – Explains whether your location has an exclusive or protected territory.
• Non-Compete and Confidentiality Clauses – Prevents you from operating competing businesses and requires you to safeguard brand secrets.
• Renewal and Termination Terms – Outlines how long your agreement lasts, renewal options, and the circumstances under which it can be terminated.
• Compliance with Standards – Franchisees must follow brand guidelines for operations, quality, and customer service.

Understanding these terms—and their long-term implications—is critical. Always consult with a franchise attorney before signing.

Site Selection & Approval 

For location-based franchises, site selection is a major requirement. Many franchisors play a hands-on role in approving or assisting with real estate decisions. Typical considerations include:

• Demographic Fit – Making sure the area has the right population, income levels, and traffic flow.
• Zoning & Permits – Confirming the site meets legal requirements for the type of business.
• Lease Negotiation – Reviewing lease terms to avoid obligations that could strain cash flow.
• Franchisor Approval – Most agreements require franchisor approval of the final site to ensure it aligns with their brand strategy.

Training, Marketing & Branding

Franchisors expect their owners to fully embrace the brand’s systems and participate in both training and marketing initiatives. Requirements often include:

• Initial & Ongoing Training – Covering operations, customer service, technology, and compliance with brand standards.
• Branding & Marketing Contributions – Franchisees must follow strict branding guidelines and usually contribute to advertising funds.
• Co-Op Marketing Programs – Some systems require participation in local or regional co-op advertising to build awareness.

This ensures customers have a consistent experience with the brand no matter which location they visit.

Performance Metrics & Reporting

Franchisees are also accountable for business performance. Franchisors may set expectations and monitor results through:

• Key Performance Indicators (KPIs) – Benchmarks such as sales targets, customer satisfaction scores, or operational standards.
• Regular Reporting – Submitting sales, financial, and operational data.
• Consequences for Underperformance – Failure to meet brand requirements can lead to additional training, probation, or—in extreme cases—termination.

Personal Requirements 

While financial strength is essential, franchisors also look for certain personal qualities in their owners:

• Entrepreneurial Drive – Motivation to grow the business and overcome challenges.
• Relevant Skills & Experience – Management, leadership, or industry-specific knowledge can be a plus, though not always required.
• Passion for the Brand – A genuine interest in the product or service offered.
• Time Commitment – Willingness to devote the time and energy needed to launch and sustain the business.

Education & Certifications

Most franchises don’t require a specific degree. However, certain industries—like fitness, healthcare, or financial services—may require professional certifications or licenses. Franchisors typically provide training programs and support to bridge knowledge gaps and keep franchisees up to date.

Thinking About Pursuing Franchise Ownership?

Meeting the requirements to become a franchise owner involves more than just money. You’ll need to balance financial qualifications, legal obligations, site selection, training, and performance standards with personal commitment and passion for the brand.

If you’re serious about franchise ownership and want to know how to be a successful franchise owner, start by evaluating whether you meet these requirements. You can also seek guidance from the franchise professionals. At FranNet, our expert franchise consultants can help you evaluate the best franchise for you and walk you through the process from start to finish. Schedule your free consultation to get started!