If you've ever considered starting your own business, it could be a great time to act. According to U.S. Bank’s 2025 Small Business Survey, 96% of small business owners report their current business as successful. However, making your dream a reality can be daunting. Starting a business from scratch involves raising funds, creating marketable products and services, securing customers, and much more.
Fortunately, you don’t have to build a new business from the ground up. You can learn how to buy a business—like a franchise—instead. Starting a franchise business or buying an existing business can get you up and running quickly with significantly less risk than traditional startups.
Key takeaways
- Franchise opportunities offer proven business models with ongoing support, training, and established brand recognition.
- Franchise costs typically include initial fees ($20,000–$50,000), ongoing royalties (4%–12% of monthly revenue), and marketing fees (1%–3% of monthly revenue).
- Another alternative is to buy an existing business, which provides immediate cash flow, an established customer base, and documented financial performance.
- Both options significantly reduce startup risks compared to building a business from the ground up.
What are franchise opportunities?
Franchise opportunities are a business model where you purchase the rights to operate under an established brand name. When you buy a franchise, you're essentially licensing a successful business concept that includes everything from operational procedures to marketing plans and ongoing support. Many well-known brands are franchises, such as McDonald's, Taco Bell, the UPS Store, Planet Fitness, and Ace Hardware.
The franchise model creates a partnership between the franchisor (the company that owns the brand and business system) and the franchisee (you, the individual who purchases the rights to operate the business). This relationship provides you with a roadmap for success while allowing you to own and operate your own business.
"A franchise is a business with training wheels," says Tom Scarda, CEO and founder of The Franchise Academy, a franchise coaching firm. "The franchise company holds the owner's hand and teaches the franchisee best practices from day one until the owner sells. The owner will keep almost 100% of the proceeds from the sale of the business and, of course, daily income while it operates."
The franchise system works because it combines the entrepreneurial spirit of individual ownership with the proven success of established business models. You get the benefit of brand recognition, a tested business plan, and ongoing support while maintaining ownership of your local business.
How to evaluate franchise opportunities
Choosing the right franchise requires careful research and analysis to ensure it aligns with your goals, budget, and lifestyle preferences. Following a process helps potential franchisees make an informed decision.
1. Research industries and identify your interests
Start by examining industries that interest you and match your skills, experience, and passion. Consider factors like your background, the time commitment required, and whether you want a business that operates during traditional hours or involves evening and weekend work.
Look at industry trends and growth projections for 2025 and beyond. Fast-growing sectors like health and wellness, senior care, home services, and technology-based franchises often present strong opportunities. However, don't overlook established industries like food service or retail if they align with your interests and local market needs.
2. Request and analyze franchise disclosure documents
The franchise disclosure document (FDD) is a legal document that franchisors must provide to prospective franchisees at least 14 days before signing any agreement. This comprehensive document contains 23 sections of crucial information about the franchise opportunity.
Pay special attention to Item 19 (Financial Performance Representations), which shows average revenues and expenses of existing franchisees. Review Item 5 (Initial Fees) and Item 6 (Other Fees) to understand all costs involved. Item 20 provides contact information for current and former franchisees—use this to conduct your own research.
3. Evaluate franchisor support and training programs
Assess the quality and comprehensiveness of the franchisor's training program. Strong franchisors provide initial training covering operations, marketing, financial management, and customer service. Look for ongoing support, including regular check-ins, additional training opportunities, and marketing assistance.
Examine the franchisor's track record for supporting franchisees through challenges. Ask current franchisees about the responsiveness and helpfulness of the corporate support team. A franchisor that provides robust support significantly increases your chances of success.
4. Analyze territory rights and market potential
Understand your territorial rights and whether the franchisor grants exclusive or non-exclusive territories. Exclusive territories protect you from competition from other franchisees of the same brand, while non-exclusive territories may allow multiple locations in your area.
Research your local market demographics to ensure sufficient demand for the franchise concept. Consider factors like population density, income levels, competition, and local economic conditions. A thorough market analysis helps predict your potential for success.
5. Speak with current and former franchisees
Contact multiple current franchisees to learn about their experiences. Ask about profitability, challenges, the quality of franchisor support, and whether they would make the same decision again. Don't limit yourself to the references provided by the franchisor—research and contact franchisees independently.
Also, speak with former franchisees if possible. Understanding why they left the system can provide valuable insights into potential challenges or limitations of the franchise opportunity.
How much does it cost to buy a franchise business?
You’ll need a complete financial picture to choose the right franchise and secure adequate funding. The costs extend beyond the initial investment and include ongoing franchise fees that affect your profitability.
Franchise fees and startup costs
The franchise fee is your upfront payment for the rights to use the franchisor's brand, systems, and support. These fees typically range from $20,000 to $50,000 for most franchises, though some premium brands may charge $100,000 or more. You’ll also usually pay a franchise royalty and a marketing fee as a percentage of your monthly revenue.
Most franchises charge ongoing royalty fees ranging from 4% to 12% of gross revenue. These fees fund ongoing support, training, and system improvements. Marketing fees typically range from 1% to 3% of gross revenue and contribute to national advertising campaigns and marketing materials. Consider these fees as investments in your business' continued success rather than just expenses.
Startup costs and working capital needs
Beyond franchise fees, you'll need capital for equipment, inventory, leasehold improvements, signage, and initial marketing. Total startup costs often range from $100,000 to $300,000, depending on the franchise type and size but can be lower. For example, you might only need $75,000 to start a small service-based franchise that doesn’t require office space or expensive equipment, while a full-service restaurant franchise could need $500,000 or more for a physical location and equipment.
Don’t forget to factor in additional costs that may not be immediately apparent. These include professional fees for attorneys and accountants, insurance premiums, permits and licenses, and working capital to cover operating expenses during your initial months of operation.
Many financial experts also recommend having 6–12 months of operating expenses available as working capital. This safety net helps you navigate the initial period while building your customer base and achieving profitability.
Legal requirements for franchisees
Franchise opportunities involve significant legal commitments that affect your business plan, territorial rights, and exit strategies. Potential franchisees need to understand the legal aspects so they can make informed decisions.
Franchise disclosure documents
Federal law requires franchisors to provide the franchise disclosure document (FDD) at least 14 days before you sign any agreement or pay any money. This "cooling off" period allows you to review the document thoroughly and consult with advisers.
The FDD must be updated annually and whenever material changes occur. Pay attention to any recent changes that might affect the franchise opportunity. If a franchisor fails to provide the FDD or provides it late, you may have grounds to cancel the agreement.
Franchise agreements
The franchise agreement is a binding legal contract that governs your relationship with the franchisor. This document outlines your rights and obligations, territorial boundaries, term length, renewal conditions, and termination clauses. Unlike the FDD, which is standardized, franchise agreements are often negotiable.
Key legal provisions to understand include territorial rights, non-compete clauses, transfer restrictions, and termination conditions. Read it carefully: Some agreements include personal guarantees that make you personally liable for franchise obligations even if you operate through a corporation or LLC.
Importance of legal review
Always have a qualified franchise attorney review both the FDD and franchise agreement before signing. Franchise law is complex and varies by state, making professional legal advice essential for protecting your interests.
An experienced attorney can identify potential red flags, explain complex provisions, and sometimes negotiate more favorable terms. While legal fees add to your startup costs, they're a worthwhile investment in protecting what may be your largest financial commitment.
Buying an existing business vs. buying a franchise
What about buying existing small businesses that aren’t franchises? Both options offer advantages over starting from scratch, but they serve different needs and risk tolerances.
| Factor | Existing Business | Franchise |
| Initial investment | Varies widely based on business value | Franchise fee + setup costs (typically $100,000-$500,000) |
| Ongoing fees | None after purchase | Royalties (4%-7%) + marketing fees (1%-3%) |
| Support level | Limited to seller transition period | Ongoing training, marketing, and operational support |
| Brand recognition | Local reputation only | Established national/regional brand |
| Flexibility | Complete operational control | Must follow franchise system requirements |
| Risk level | Moderate (existing track record) | Lower (proven business model) |
Buying an existing business is often considered the least risky method of becoming a business owner, says John R. Allen III, managing partner of Allen Business Advisors, a business brokerage firm.
"If you buy a business, there are customers and clients, systems and processes in place, documented financial performance that will allow a new owner to predict future income, and the former owner is a mentor to help the new owner grow the business," he explains. "Depending on the type of business purchased and the complexity, the former owner will have an employment agreement with the new owner."
Lisa Kipps-Brown, author of "Boomer Cashout: Increase Your Business's Value & Marketability to Sell for Retirement," encourages younger entrepreneurs to consider existing businesses. "Buying from a seasoned owner gives you the opportunity to learn from their decades of experience, taking a shortcut in the school of life," she says. "Most existing businesses are a big part of their local community and have considerable goodwill."
On the other hand, franchises offer several unique benefits that independent businesses cannot match. You receive a comprehensive business plan, training programs, proven marketing strategies, bulk purchasing power, and ongoing support. The franchise system has already worked out the common problems and challenges that new businesses face.
How to finance your business purchase
Once you’ve found the right franchise or existing business, you’ll need to secure adequate funding for your investment. Explore multiple financing options, understand the requirements and benefits of each approach, and then use a combination of funding sources to cover your needs.
SBA loans and traditional financing
Small Business Administration (SBA) loans are among the most popular financing options for small business purchases. The SBA Franchise Directory lists approved franchises that qualify for SBA financing, which typically offers favorable terms, including lower down payments and longer repayment periods.
Traditional small business loans and equipment financing can also fund business purchases. Banks often view established businesses more favorably than independent startups because of their proven business models and ongoing support systems.
Franchisor financing programs
If you’re buying a franchise, many franchisors offer financing to qualified candidates. This might include direct financing, partnerships with preferred lenders, or equipment leasing programs. Some franchisors provide financing for the franchise fee itself, allowing you to preserve capital for working expenses.
Franchisor financing often comes with competitive terms because the franchisor has a vested interest in your success. However, compare these options with other financing sources to ensure you're getting the best terms available.
Alternative funding sources
Anyone considering how to buy a business can use options like personal savings, retirement account rollovers (ROBS), investor partnerships, and crowdfunding. Some small businesses use home equity loans or lines of credit, though these options put personal assets at risk.
Veterans may qualify for special financing programs and discounts through various veteran-focused initiatives. Many franchisors offer reduced fees or special financing terms for qualified veterans as part of their commitment to supporting veteran entrepreneurship.
How LegalZoom can support your new business journey
Navigating the legal requirements of starting a business requires careful attention to compliance and proper business structure. Most franchisees and other business owners operate through a limited liability company (LLC) or corporation to protect personal assets and optimize tax treatment. LegalZoom's business formation services streamline the process of establishing your business entity, ensuring proper registration and compliance with state requirements.
Small businesses, including franchises, also must maintain compliance with state and local regulations, file annual reports, and keep corporate records current. LegalZoom's compliance services can help you stay ahead of compliance filings and manage your licenses with end-to-end coverage and support.
FAQs about franchise opportunities
What is the most profitable franchise to own in 2025?
Profitability varies significantly based on location, management, and market conditions, but some consistently high-performing franchise categories include quick-service restaurants, home services, and health and wellness concepts. The right franchise will match your background and have strong unit economics in your target market.
What support do franchisors typically provide?
Quality franchisors provide comprehensive initial training, plus ongoing support that includes business coaching, a marketing plan, operational guidance, and access to preferred vendors. The best franchisors also offer technology support, continuing education programs, and annual conferences. Review the support offerings carefully, as they significantly impact the success of your franchise business.
What legal documents are required when buying a franchise?
The two primary legal documents are the franchise disclosure document (FDD) and the franchise agreement. The FDD provides detailed information about the franchise opportunity and must be provided at least 14 days before signing any agreement. The franchise agreement is the binding contract that governs your relationship with the franchisor.
How do franchise royalties work?
Franchise royalties are ongoing fees paid to the franchisor, typically calculated as a percentage of gross revenue (usually 4%–7%). These fees are generally due monthly and fund ongoing support, training, system improvements, and brand development.
Stephanie Vozza contributed to this article.