From money to mindset, what new franchisees need to know to set themselves up for success
By Cody Teets
As an avid proponent of franchising and the creation of generational wealth, I have experienced first-hand the success that comes with this business model. For emerging entrepreneurs, the best news comes from recent data projecting franchising growth at 2.4% for 2025, outpacing the broader U.S. economy’s expected 1.9% GDP growth.
With this comes the expectation that more than 210,000 jobs will be created and more than 20,000 new business units coming online across the country.
While the franchise model offers flexibility and opportunity, it’s not without its own unique set of challenges, particularly for first timers. After 25 years in the franchise business, I’ve seen plenty of people make mistakes.
A few insider tips to keep front and center can help new owners successfully make the leap to a rewarding second act in franchising while avoiding the pitfalls that could trip them up.
Tip #1: follow your passion. Think back on your past career and which aspects you did and didn’t enjoy. What are you passionate about? Do you advocate life balance? Maybe a spa franchise is your best fit. More of a numbers person? A tax and accounting business might better align with what matters most to you.
The franchise world is demanding, and the hours can be long, so if you don’t pick a business that you’re genuinely passionate about, it’s going to be an aggravating business journey. There are literally hundreds of different types of franchise businesses out there, so find your match.
Tip #2: know thyself. Consider this the structured, strategic cousin of ‘follow your passion.’ Whether you take a personal assessment like the Clifton’s Strengths assessment, revisit performance reviews from your past job, or solicit constructive criticism from friends and family, it’s really important that you know yourself, especially your strengths and opportunities.
For example, are your people management skills a bit of a weak spot? If you know that about yourself, you can consider a smartphone repair franchise that can be staffed just by you and one other person rather than a restaurant that might require dozens of employees. Play to your skills and don’t try to “swim against the current.”
Tip #3: do your homework. Make sure you fully understand some of the words and meanings of your franchise agreement, including details like where you can open a location. I’ve encountered franchisees who invested months in training for a franchise, expecting that a location would be available in their home territory by the time they finished. Instead, they discovered they’d have to move to a different state to open because no local openings came up.
Another pro tip on the homework front? Go to the city where you plan your purchase and review the construction plans for the roadways in your area. Is there a multiyear water-main project that will choke off access to your chosen site for half the year? Best to know that ahead of time. Ask as many questions as necessary to ensure the brand matches your brilliance, not just your budget.
Tip #4: have a cash buffer. Everyone knows you need enough money up front to buy the business and get it up and running, but you also should aim to have a minimum cash reserve of 12-months of operating cash flow to see you through any unexpected bumps the business might run into. If you are buying an existing franchise with at least 3 years of financial statements, you may be able to reduce this cash reserve based on past business trends.
Think about COVID – no one saw that one coming. Or, you might have a set of employees who hear that ICE is in the neighborhood – and even though they have green cards, they don’t want any hassles, so they decide to lay low for a couple weeks, or maybe not come back at all. No matter how good of a business planner you may be, things will come up that are outside your control.
Tip #5: expect to be entrepreneurial, but only to a point. A big draw of franchising is the chance to scratch an entrepreneurial itch. But keep in mind that when you buy a franchise, you’re buying an established system, with its own branding and marketing guidelines, required uniforms, suppliers, point of sale systems, and even service offerings.
Let’s say you buy a spa franchise and decide that you’d like to offer microneedling to your customers, in addition to the other services. Well, it may turn out that the franchisor doesn’t want to put the cost of a microneedling machine on all their franchisees, so they don’t want microneedling services as part of their current model. Entrepreneurism is built into the DNA of the franchise model, but it has its limits.
In the end, franchising rewards those who bring both heart and discipline. By keeping these key tips in mind, first-timers can successfully pivot to a rewarding and exciting long-lasting career – without the rookie mistakes that can make those early days harder than they need to be.
Franchising can be more than a business — it can provide a legacy. With the right brand, a clear roadmap, and aligned partners, you don’t just create income, you create impact. You build something your family can grow into. That’s the power of franchising done right — a bridge from ambition to ownership, and from ownership to generational wealth.
Cody Teets is a principal at The Transition Strategists and has 25 years of experience with McDonald’s working with franchisees.