Franchise opportunities: how to judge one before you call

Where franchise opportunities are found

• Franchise directories and portals. Searchable lists by price, sector and country. Many are paid listings, so placement reflects advertising, not quality.
• Franchise shows and expos. Brands rent booths to meet buyers in person. Useful for comparing many systems quickly, but expect a sales pitch at every table.
• Franchise brokers and consultants. They match buyers with brands. Many are paid by the franchisor when a sale closes, not by you. Ask any broker how they are paid and which brands they represent, so you know which options you aren't being shown.
• Franchise associations. National associations publish member lists and buyer education. Membership is a signal of participation, not a guarantee of anything.
• Brand websites. The most direct source, and the most promotional.
• Franchises for sale by current owners. Existing outlets come up for resale. Buying one usually needs the franchisor's approval and a transfer fee, but you get a trading history to check.

Lists of the "best franchises to own" are a starting point, not a verdict: many are based on fees paid or brand size. Wherever you find a franchise to buy, the documents the franchisor gives you are what count, not the listing.

Screen an opportunity in an evening

Before you spend a day at a discovery meeting, answer these from the franchisor's own materials and a phone call:

• What would I do all day? Picture the hours, the customers and the staff. A franchise is a business you operate.
• What is the total initial investment? Not the fee: the total, including setup and working capital.
• What do I keep paying? Royalties, marketing contributions, technology fees and any minimums.
• How many units operate, and how many closed or changed hands recently? Both numbers appear in a US disclosure document and are worth asking for anywhere.
• Does the franchisor make earnings claims? If so, where are they documented and what are they based on?
• Is there support in my country? Ask how many outlets operate there, where training happens and whether the system has been adapted to local law, currency and suppliers.

If the answers are vague or the pressure is high, that tells you something too.

Red flags checklist

Slow down, or walk away, if you see any of these:

• Pressure to sign or pay a deposit before you have had time to review the franchisor's documents.
• Earnings promises in emails, ads or meetings that don't appear in the written disclosure.
• Reluctance to let you speak to current and former franchisees.
• A broker who won't say how they are paid.
• Large unexplained fees, or required purchases at prices you can't compare.
• A territory described as protected that the agreement doesn't actually protect.
• No clear answer on what happens if you want to sell or leave.

Disclosure rules differ by country

In many places, a franchisor must give you a disclosure document before you sign or pay. The rules vary, so check the law where you would operate. Some examples:

• United States. The FTC Franchise Rule requires a Franchise Disclosure Document at least 14 calendar days before you sign a binding agreement or pay. Some states add registration or extra protections.
• Canada. Several provinces have franchise laws. Ontario's Arthur Wishart Act and Alberta's Franchises Act both require a disclosure document at least 14 days before you sign or pay. British Columbia, Manitoba, New Brunswick and Prince Edward Island have franchise laws too.
• United Kingdom. There is no franchise-specific disclosure law. The British Franchise Association is a voluntary industry body whose members agree to its code; brands outside it have no such commitment.
• European Union. Several EU countries require pre-contract disclosure. In France, the Loi Doubin requires a disclosure document at least 20 days before signing or paying. Others, including Italy and Belgium, have their own disclosure laws.

Where no law requires a disclosure document, ask for the same information anyway: fees, total investment, the franchisor's finances, unit openings and closures, and the basis of any earnings figures. A franchisor that won't share it is telling you something.

Checking a franchise wherever you are

The questions are the same everywhere, but the details change. In the UK, check whether the brand is a British Franchise Association member and get a franchise solicitor's review, because there is no statutory disclosure to lean on. In Canada, ask which provincial law covers your purchase and whether costs quoted in US dollars hold up in Canadian dollars. In the US, read the FDD, and check whether your state adds registration or extra rules. In every country, ask how many outlets already operate near where you would open, because that affects both demand and your territory.

Questions to ask in a discovery meeting

• What does a new owner's first year look like, week by week?
• Which costs in your investment table do owners most often underestimate?
• What support do you give in the first 90 days, and who provides it?
• How are territories defined, and can you open another unit near mine?
• What are the most common reasons owners leave the system?

A different kind of opportunity

Some people browsing franchise opportunities want to build something in their own community but don't want to buy in. Play 2 Earn Sports is piloting a Territory Partner program for people who know local sports clubs, leagues and academies.

Territory Partners pay a one-time territory fee for an exclusive area: about CAD 5,000 in Ontario. The fee depends on where you are, and we confirm it in writing before you sign. In Ontario this is a franchise under the Arthur Wishart Act. Because the total initial investment is $15,000 or less, no disclosure document is required, but the Act's duty of fair dealing still applies. We don't sell territories where a disclosure document or registration would be required, including British Columbia, Saskatchewan and several US states. There you can join as a Sports Ambassador instead, which has no fee. After the territory fee, partners are independent and paid commission only: a share of the platform fee each time a player registers and pays at a club they brought in, every season. The terms are proposed and can change before you sign, and the signed agreement is what applies. There is no salary, and many people in commission sales earn little or nothing.

Whether any arrangement is regulated as a franchise or business opportunity depends on its actual terms and the law where it is offered. We are having the program reviewed by counsel, and we make no claim that it is exempt from franchise or business-opportunity rules.

Questions