10 Legal and Financial Steps Before Purchasing a US Franchise

Thinking of purchasing a US franchise? It can be a great path for US small business owners looking to tap into a proven business model. But before you sign any agreement, there are key legal and financial steps to take—especially if you want to start strong and stay compliant from day one.

Franchise ownership involves more than choosing a brand. It means understanding your obligations, evaluating the financial commitment, and often working with experts who offer accounting services in US to ensure you’re making the right decision for your long-term growth.

Here’s a simplified checklist of what you should do before purchasing a US franchise:

1. Review the Franchise Disclosure Document (FDD)

Before anything else, read the FDD thoroughly. It’s a legal requirement—and a goldmine of critical information.

• Review the business history, franchise fees, legal issues, and financial performance details.

• Focus on Item 19 (earnings claims) and Item 7 (investment estimates).

2. Understand Initial and Ongoing Costs

Buying a franchise isn’t just about the upfront fee—it includes long-term financial commitments.

• Calculate all startup costs, from licensing fees to real estate and equipment.

• Plan for recurring fees like royalties and marketing contributions.

3. Evaluate Franchise Profitability

Make sure the numbers make sense. You want a franchise that fits your financial goals.

• Study income potential and typical profit margins.

• Work with a trusted accountant to break down the financials.

4. Verify Franchise Registration

Some states require franchisors to register before they can legally sell to you.

• Confirm the franchise is registered in your state (if required).

• Check for state-specific disclosure laws and filing requirements.

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5. Seek Legal Review of the Franchise Agreement

Don’t sign anything without a legal expert reviewing it first. This protects you from unpleasant surprises.

• Hire a franchise attorney to analyze the contract’s fine print.

• Watch for restrictions on territory, resale, or termination.

6. Evaluate Your Financing Options

Know where your money will come from before committing.

• Explore options like SBA loans, bank financing, or personal funds.

• Understand how debt will affect your business’s cash flow.

7. Build a Financial Forecast

A solid business plan with clear projections helps you (and lenders) see the big picture.

• Estimate revenues, expenses, and break-even timelines.

• Consider professional help to build a reliable financial model.

8. Check for Local and Federal Compliance

You’ll need to comply with state and federal rules beyond just the franchise agreement.

• Register your business properly and apply for all licenses.

• Set up payroll, taxes, and recordkeeping systems.

9. Interview Other Franchisees

Real insight often comes from people already in the system.

• Ask current and former franchisees about profitability, support, and challenges.

• Learn what to expect day-to-day.

10. Assess Your Personal Readiness

Finally, take a moment to check in with yourself. Are you ready to run this business?

• Be honest about your time, energy, and comfort with structure.

• Franchises offer guidance—but the hustle is still yours.

Summary

Purchasing a US franchise can be an exciting path to small business ownership, but only if you take the time to get the financial and legal groundwork right. From reviewing the FDD to building a reliable financial forecast, each step plays a critical role in setting your business up for long-term success. Whether you’re new to entrepreneurship or scaling your investments, having sound planning and professional guidance—especially around accounting services—can make all the difference.

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