Franchise Guide: What to know before you invest

Thinking of buying a franchise? Good move — franchising lets you run a proven business model instead of starting from scratch. But not all franchises are equal. This page gives clear, practical steps and numbers you can use right now to evaluate opportunities in India.

How much does a franchise cost?

Costs vary a lot. Expect three main buckets: initial franchise fee, setup/investment, and ongoing fees. Initial fees can be small for local or home-based concepts (₹50,000–₹5 lakh) and much higher for national brands (₹10 lakh–₹1 crore+). Setup costs — lease, fit-out, equipment, inventory — often match or exceed the initial fee. Ongoing costs usually include royalties (commonly 5–12% of revenue) and marketing levies (1–3%). Build a conservative cash buffer of 6–12 months of operating expenses before you open.

Sales and margins differ by sector. Quick-service restaurants need higher upfront capex but can scale fast. Education and services may need lower capex but rely on quality and retention. Ask for sample P&L statements from existing outlets to see real numbers.

Choosing the right franchise: practical checklist

Don’t sign without checking these points:

- Talk to at least 5 current franchisees. Ask about profitability, training quality, hidden costs, and how fast the franchisor responds to issues.

- Read the franchise agreement carefully. Key clauses: territory protection, renewal terms, termination triggers, performance targets, fee structure, and who pays for upgrades or rebranding.

- Verify support: does the franchisor provide site selection help, training, marketing materials, and supply chain support? Are manuals and SOPs detailed?

- Visit multiple outlets to see standards in action. Numbers on paper can look great; operations tell the real story.

- Check brand reputation online and with customers. A brand with high churn among franchisees or many disputes is a red flag.

- Consider exclusivity. A weak territory clause can mean nearby competition from the same brand later.

- Confirm training length and whether initial employees are trained by the franchisor or you must hire experienced staff.

- Ask about technology: POS, inventory, reporting systems. Good tech saves time and protects margins.

- Plan financing early. Banks, NBFCs, and some specialized lenders offer franchise loans. Prepare a 3–5 year business plan and collateral details; many lenders want a proven franchise or cosigner.

- Get legal help. Hire a lawyer experienced in franchise law to negotiate terms you don’t understand.

Franchising can fast-track business ownership if you do the homework. Use real numbers, talk directly to operators, and protect yourself in the agreement. If you want, check specific sectors first — food, education, retail — and compare typical investment and payback times before you choose.