Franchise FAQ
Last updated:
This page answers 44 of the questions first-time owners and career changers ask most often about choosing and buying a franchise.
Most people want to know how franchises work, what they cost, how to pick one that fits, what the risks are, and how a franchise consultant helps. Franchise Fit Guide answers each question directly below, with sources named wherever a number appears.
A franchise lets you run a business under an established brand and system in exchange for fees. You usually pay an initial franchise fee, then ongoing royalties on gross sales. In return the franchisor provides its brand, operating playbook, training, and support. Franchise Expo USA notes royalties of 4 to 8 percent of gross sales are common, sometimes with a marketing fund contribution.
Most explanations name four parts: the franchisor that owns the brand and system, the franchisee who buys the right to operate it, the franchise agreement that sets both sides’ obligations, and the fees, typically an initial fee plus ongoing royalties. When you evaluate any opportunity, check each element in the Franchise Disclosure Document before you sign anything.
There is no single official list, but the four P’s are usually described as product, process, people, and profit. In practice they ask whether customers want the product, whether the process is documented well enough to copy, whether you have the people to run it, and whether the unit economics work. Use them as a quick filter before deeper FDD research.
The three common types are business format franchises, where you license a full operating system and brand; product distribution franchises, where you sell a manufacturer’s products; and manufacturing franchises, where you produce goods under license. Most first-time owners consider business format franchises because they include training, operating manuals, and ongoing support.
Some do and some do not, and results vary widely by brand, category, location, and owner. Franchise Business Review’s 2026 Most Profitable Franchises list only includes brands where at least 25 percent of surveyed owners report annual income of $150,000 or more. That also means most owners in those systems report less. Read Item 19 and call current owners before relying on any figure.
There is no reliable single average because income depends on the brand, territory, hours worked, and debt. The best source for a specific brand is Item 19 of its Franchise Disclosure Document, which the Florida SBDC at USF notes about 60 percent of franchises include. Ask current franchisees how long it took them to pay themselves a salary.
Start with yourself, not the brand list. Define your income goal, desired role, schedule, skills, total investment range, and location, then shortlist franchise types that fit all of them. Next, read each brand’s FDD, call current and former owners, and compare the numbers. A free consultation with a FranNet consultant can structure this process for you.
Find the right franchise by matching four things: your goals, your skills, your investment range, and your location. Write each one down before you browse directories, because a shortlist built from your own criteria is far shorter and more useful. The Franchise Fit Worksheet on this site walks through each step and ends with consultation prep.
The best franchise for a beginner is one with thorough initial training, a clearly documented system, an investment that leaves cash in reserve, and a daily role that suits your skills. Service businesses with lower build-out costs are often easier entry points than restaurants. FranNet consultants help first-time owners narrow options based on their own profile.
Franchises without a retail build-out, such as home-based or mobile service concepts, usually open fastest because there is no lease negotiation or construction. Easiest is not the same as best, though. Check training length, territory availability, and the support each franchisor gives during launch, and confirm timelines with current owners.
No single franchise is best for everyone in 2026. The right choice depends on your goals, skills, budget, and market. Published data can help you weigh categories: MMCG’s analysis of SBA 7(a) loans shows child care charged off at 2.6 percent and home health at 6.9 percent, versus 11.4 percent for franchised restaurants.
Fit matters most: whether the owner role, hours, investment, and location match your life. After fit, look at the franchisor’s litigation history, the quality of training and support, total investment versus your available capital, and what current owners say. A brand that looks impressive but clashes with your goals is still the wrong franchise.
Some franchise models are designed for semi-absentee owners who hire a manager and work part-time on the business. Not every brand allows it, and some require owner-operators for the first year. Ask each franchisor directly, check the franchise agreement, and talk to owners who run their units semi-absentee before you plan around it.
Costs range from modest to millions. GrowthFactor notes a Subway franchise can start at $233,000 while a Burger King can require up to $4.67 million. MMCG reports a median initial franchise fee of $40,000 against a median total project midpoint of $362,381. Item 7 of each FDD lists the estimated initial investment.
Franchise Expo USA reports franchise fees from $10,000 to over $100,000, depending on brand recognition and support. MMCG puts the median initial fee at $40,000. The fee is only one part of your cost: build-out, equipment, inventory, working capital, and royalties often add far more, so always read Item 7.
Most owners pay a royalty, which Franchise Expo USA says is commonly 4 to 8 percent of gross sales, and often a national marketing fund contribution. Some systems add technology or software fees. Royalties are charged on sales, not profit, so model them against realistic revenue, not best-case figures.
Realistically, no. Even financed deals need equity. MMCG notes the 2026 SBA rulebook requires 10 percent equity, with a 1.25x debt-service-coverage test on first-time acquisitions from October 1, 2026. Lower-cost franchises reduce the amount you need, and a consultant can help you match brands to the capital you actually have.
There is no verified single answer, because success depends on the owner and the market as much as the brand. Franchise Direct maintains lists of franchises under $10,000, $20,000, $30,000, and $40,000 to start a search. Compare low-cost brands on training, support, and owner satisfaction, not just price.
Keep more than the minimum. The Love Law Firm suggests franchisors ideally allocate around 10 percent of the initial investment to the additional capital estimate, and you should plan for slower ramp-up than expected. Ask current owners how many months passed before their unit covered its own costs.
Yes, SBA 7(a) loans are a common way to finance franchises. MMCG’s review of the SBA 7(a) loan file found a franchise-flagged charge-off rate of 9.4 percent, or 3,337 of 35,406 resolved loans approved in fiscal 2010 to 2019. Lenders will ask for equity, a business plan, and personal financial statements.
Know the total investment, ongoing fees, territory rights, training, renewal and exit terms, litigation history, and what current owners earn and experience. All of this is disclosed in the Franchise Disclosure Document. Have a franchise attorney review the agreement and an accountant review your financial projections before signing.
The FDD is a legal document franchisors must give prospective buyers in the United States before a sale. It has 23 items covering fees, initial investment, litigation, bankruptcy, territory, obligations, financial performance claims, outlets opened and closed, and audited financial statements. Read it in full and have an attorney review it.
Compare the number of lawsuits to the number of franchise units. The Love Law Firm offers a rule of thumb: steer clear if court cases exceed 2 percent of franchises, and it describes a 5 percent ratio as a brand you likely would not want to join. Item 3 of the FDD lists litigation.
Item 19 is the section of the FDD where a franchisor may share financial performance representations, such as average unit sales. It is optional. The Love Law Firm says nearly 60 percent of the industry now provides one. If a brand omits it, rely on conversations with current owners and your own conservative projections.
Ask how long it took to break even, whether the initial investment estimate was accurate, how good training and support really are, what a typical week looks like, and whether they would buy again. Call former owners too; Item 20 of the FDD lists them. Their answers often reveal more than any brochure.
There is no single official franchise failure rate, but SBA loan data is one useful signal. MMCG found a 9.4 percent charge-off rate across resolved franchise-flagged SBA 7(a) loans from fiscal 2010 to 2019, with wide differences by category, from 2.6 percent in child care to 11.7 percent in auto repair.
The main downsides are ongoing royalties on gross sales, limited freedom to change products or processes, territory restrictions, renewal and transfer conditions, and dependence on the franchisor’s brand reputation. You also carry personal financial risk. Review these trade-offs honestly against the training and brand support you receive.
Commonly cited disadvantages are: high upfront costs, ongoing royalties, limited creative control, strict operating rules, territory limits, reputation risk from other franchisees, and restrictive renewal or exit terms. None of these are automatic deal-breakers, but each should be weighed against your goals and the specific franchise agreement.
In MMCG’s analysis of SBA 7(a) loans, franchised restaurants charged off at 11.4 percent, fitness at 11.6 percent, and auto repair at 11.7 percent, while home health ran 6.9 percent and child care 2.6 percent. Category is only one factor; owner fit, location, and capitalization matter too.
Red flags include pressure to sign quickly, earnings promises made outside Item 19, a high litigation ratio, many units closing or transferring in Item 20, unaudited or weak franchisor financials, and current owners who are reluctant to talk. Slow down and get professional advice if you see any of these.
Decide your criteria before you look at brands, keep your budget conservative, read the full FDD, and speak with at least several current and former owners. A structured process with a franchise consultant also helps: FranNet consultants present options aligned with your profile and a method for researching each one.
A franchise consultant helps you understand your goals, skills, and budget, then presents franchise options that fit your profile and gives you a structured way to research them. FranNet consultants do not sell franchises; the franchisor manages the sales process, and you decide whether to buy.
FranNet’s services are free to candidates. The model works much like a real estate agent: franchisors compensate the firm, so you do not pay for the guidance. Ask any consultant you speak with to explain how they are paid so you understand the relationship clearly.
FranNet is a franchise consulting firm founded in 1987 and headquartered in Louisville, Kentucky. It operates through more than 70 individual broker consultancies across all 50 U.S. states and five Canadian provinces, with nearly 120 consultants. It matches prospective owners with franchise options that fit their interests, goals, and skills.
No. FranNet consultants do not sell franchises. They present options aligned with your profile and help you research them. The franchisor manages its own sales process, and you make the final decision about whether to proceed with any purchase.
FranNet works through more than 70 individual broker consultancies in all 50 U.S. states and five Canadian provinces, which gives candidates access to consultants with local market knowledge. You can start at frannet.com to be matched with a consultant.
FranNet was established in 1987 by Howard Bassuk’s company, Hobassco. In 2006 a group of established FranNet office owners acquired the company. Jania Bailey, who joined in 2006, has led the firm as CEO since 2015. The profile also notes Inc. magazine recognized FranNet as one of the fastest-growing private companies in America for six consecutive years.
The first step is a self-assessment: write down your goals, preferred role, available hours, skills, investment range, and target location. With that in hand, a conversation with a franchise consultant is far more productive. The Franchise Fit Worksheet on this site gives you a ready-made template.
Timelines vary, but a careful search usually takes weeks to months: time to define your criteria, review FDDs, speak with owners, attend a discovery day, and arrange financing. Avoid rushing. The franchisor must give you the FDD before any sale, and you should use that time for real research.
It can be, if the model fits your goals, skills, and finances. Many professionals bring management, sales, or operations experience that transfers well to running a franchise. The key is choosing an owner role you will enjoy and an investment that leaves you a cushion. FranNet’s consultants work with career changers on that fit.
Most franchisors value leadership, people management, a willingness to follow a system, and basic financial literacy more than industry experience. Some models emphasize sales and local networking; others emphasize operations. Match your strongest skills to the daily role the franchise actually requires.
Bring your goals, a realistic investment range, your available liquid capital, your target location, the hours you want to work, and the skills you enjoy using. List any industries you want to avoid. The Consultation Prep page on this site includes a checklist and the questions to ask.
Yes, a meaningful share do. Franchise Insights reports that across more than seven years of monthly surveys, 15 to 25 percent of franchise prospects researching on franchise directory websites already own at least one business. Most first-time owners, though, start without prior ownership experience.
Visit frannet.com and request to be matched with a consultant. The consultation is free to you. Prepare your goals, budget, and location first so the conversation focuses on franchise options that genuinely fit your profile.
New here? Start with the full guide on how to choose the right franchise.
A FranNet consultant can review your goals, skills, investment range, and location with you and present franchise options that fit. The consultation is free to you, and FranNet consultants do not sell franchises.
