So you’ve found a franchise you like. Maybe it’s that trendy bubble tea shop in your neighborhood, or that coaching center that’s opening in every mall. You’re excited. The franchisor’s pitch was impressive. The projections look amazing.
And now you’re ready to sign.
Wait.
I’ve been in this business long enough to see people rush into franchise agreements they regret within six months. Not because the franchise was bad, but because they didn’t do their homework. They got swept up in the excitement and missed some really obvious red flags.
Look, I get it. When you see that beautiful outlet and imagine yourself running it, it’s easy to skip the boring due diligence stuff. But trust me – spending a few weeks on this checklist will save you years of regret (and lakhs of rupees).
Let’s go through exactly what you need to check before you commit.
1. The Money Reality Check (Because Numbers Don’t Lie)
Forget what the brochure says for a minute. Let’s talk actual money.
What You Need to Verify:
Sit down with a calculator and your bank statement. Be brutally honest with yourself.
The franchisor says total investment is ₹25 lakhs? Here’s what you actually need:
- The ₹25 lakhs (obviously)
- Another ₹8-10 lakhs as buffer (things WILL cost more than projected)
- 6 months of living expenses for yourself (₹3-5 lakhs minimum)
- Emergency fund (₹2-3 lakhs)
So you really need around ₹40 lakhs available. Not invested in property or mutual funds – actual liquid cash you can access.
Don’t have it? Then either find a cheaper franchise or wait until you do. I’ve seen people take loans to cover the “buffer” money. Bad idea. Really bad idea.
The Questions to Ask Yourself:
- Can I afford this WITHOUT taking a loan? (If you need a loan, fine, but it should only cover the main investment, not your safety net)
- Will I still have money left after the investment?
- Can I survive 6 months with zero profits?
- What if sales are 30% lower than projected?
If any of these questions make you uncomfortable, you’re not ready yet.
Get This in Writing:
- Complete investment breakdown (not just “turnkey cost” – actual line items)
- Monthly operating costs (rent, salaries, utilities, royalties)
- Working capital requirements for first 6 months
- Any additional fees they haven’t mentioned yet
I once had a client who discovered a “technology fee” of ₹50,000 annually that wasn’t in the initial pitch. These surprises add up.
2. Talk to Real Franchisees (Not the Ones They Recommend)
This is the most important thing you’ll do. Period.
The franchisor will give you 3-4 names of “successful” franchisees. Great. Talk to them. But don’t stop there.
Here’s What I Do:
Go on Google Maps. Search for the franchise brand. Find 10-12 outlets in different cities. Show up unannounced.
Yes, physically go there. On a Tuesday afternoon, not Saturday evening. Watch:
- How many customers walk in
- How the staff behaves when they think no one’s watching
- The actual quality of products/service
- How clean and maintained the outlet is
Then talk to the owner or manager. Don’t call and schedule – just show up. You’ll get more honest answers.
Questions That Get Real Answers:
Don’t ask “Is the franchise profitable?” They’ll say yes even if they’re bleeding money.
Ask these instead:
- “How long did it take to break even?” (If they hesitate or say “still working on it” after 2+ years, run)
- “What’s your average daily sales?” (Compare this to the projections you were given)
- “What’s one thing you wish someone had told you before starting?”
- “If you could go back, would you choose this franchise again?”
- “What costs more than you expected?”
- “How helpful is the franchisor after you’ve paid them?”
The last question is huge. Some franchisors disappear after taking your money. Others hold your hand for years.
Red Flags to Watch For:
- Franchisees who are vague about numbers
- Multiple outlets that look poorly maintained
- Staff who seem unhappy or undertrained
- Outlets that have closed down (find out why)
- Franchisees who say “it’s harder than they told us”
One guy I know visited 8 franchisees of a popular cafe brand. Six of them said they were struggling. He walked away from the deal. Smart move.
3. The Franchise Agreement (Read Every Single Word)
I know it’s boring. I know it’s 40 pages of legal language. Read it anyway.
Better yet, pay a lawyer ₹10,000-15,000 to read it for you. It’s the best money you’ll spend.
What You’re Looking For:
The Lock-In Period: How long are you committed? 5 years? 10 years? What if you want out after 2 years?
I’ve seen agreements where people couldn’t exit even when they were losing money every month. They were stuck paying royalties on a failing business.
Exclusivity and Territory: Do you get exclusive rights to your area? Or can they open another outlet 2 km away and kill your business?
This happens more than you think. You invest ₹30 lakhs in an outlet in Sector 18, and they open another one in Sector 22. Now you’re competing with yourself.
The Control Clauses: What can’t you do?
- Can’t change suppliers (even if you find cheaper options)
- Can’t modify the menu (even if local customers want something)
- Can’t extend hours (even during festivals)
- Can’t discount without permission (even when competition is killing you)
Some control is normal. Too much control means you’re not really a business owner – you’re just an employee who paid for the job.
Exit Options: What happens if you want out?
- Can you sell to someone else?
- Does the franchisor have to approve the buyer?
- Will they buy it back from you?
- What happens to your investment?
The Renewal Terms: After 5 years, what happens?
- Do you have to pay the franchise fee again?
- Can they refuse to renew?
- Will the terms change?
Hidden Costs in the Fine Print:
- Marketing fees (over and above royalty)
- Training costs for new staff
- Mandatory renovation every X years
- Technology or software fees
- Audit costs
If something in the agreement sounds unfair, it probably is. Negotiate. Everything is negotiable before you sign. Nothing is negotiable after.
4. The Brand’s Track Record (Do Your Detective Work)
How long has this franchise been operating in India?
If they say “We just launched in India but we’re huge internationally” – be extra careful. What works in US or Singapore might flop in Indore.
What to Research:
Google the brand name + “problems” or “complaints” or “franchise issues”. See what comes up.
Check:
- How many franchises they’ve sold in India
- How many are actually operational (not the same number, trust me)
- How many have closed in the last 2 years
- Any news about legal disputes
- Complaints on consumer forums
The Growth Pattern:
If they opened 50 outlets last year but only 30 are running now – what happened to the other 20?
Healthy franchises have steady, sustainable growth. Unhealthy ones have aggressive expansion followed by closures.
Talk to Failed Franchisees:
This is uncomfortable but super valuable. Find someone who closed their franchise. They’ll tell you things successful franchisees won’t.
How do you find them? LinkedIn works. Facebook groups. Sometimes the local franchisees know who shut down and can connect you.
5. The Support System (Will They Actually Help You?)
The franchisor promises “complete support.” Great. What does that mean exactly?
Initial Training:
- How many days?
- Where? (Do you travel to their HQ or do they come to you?)
- Who pays for travel and accommodation?
- What’s covered? (Operations, marketing, customer service, inventory management?)
- Is there hands-on training or just classroom sessions?
Ongoing Support:
- Do you get a dedicated relationship manager?
- How often do they visit your outlet?
- What happens when you have problems?
- Is there a helpline? (And do they actually answer?)
Marketing Support:
- National campaigns – who pays for them?
- Local marketing – do you handle it alone?
- Social media – centralized or you manage your own?
- Do they provide marketing materials or do you create them?
Supply Chain:
- Are suppliers reliable?
- What if you run out of stock?
- Can you source locally in emergencies?
- Are prices competitive or inflated?
Call the support number yourself. See how long it takes to get a response. Ask existing franchisees if they actually get the promised support.
Some franchisors are amazing – they’ll hold your hand through everything. Others send you a manual and disappear. Know which type you’re dealing with.
6. Location, Location, Location (Not Just Any Space)
You found a great location? Awesome. But does the franchisor approve it?
Many franchises have specific requirements:
- Minimum square feet
- Street-facing or mall?
- Parking availability
- Nearby competition
- Footfall requirements
- Demographics of the area
Don’t Sign the Lease Until:
- Franchisor has approved the location in writing
- You’ve checked local regulations (Some franchises aren’t allowed in residential areas)
- You’ve calculated if the rent is sustainable (Rent should be max 10-12% of projected revenue)
- You’ve negotiated lease terms (Lock-in period, escalation, exit clause)
I know someone who signed a 3-year lease before getting franchisor approval. Franchisor rejected the location. He was stuck paying rent on an empty space while searching for another location. Lost ₹12 lakhs.
Visit the Location at Different Times:
- Monday morning
- Wednesday afternoon
- Friday evening
- Sunday
Footfall varies dramatically. That mall might be packed on weekends but dead on weekdays. Your business model needs to work for the actual footfall, not peak time footfall.
7. The Legal and Compliance Stuff (Boring but Critical)
You need:
Company Registration:
- Proprietorship, Partnership, LLP, or Pvt Ltd? (Check what the franchise requires)
- GST registration
- FSSAI license (if food business)
- Shop and Establishment license
- Trade license from municipal corporation
Franchise-Specific Licenses: Different businesses need different licenses:
- Alcohol license (if applicable)
- Health department clearance (for food/healthcare)
- Fire safety certificate
- Pollution clearance
- Signage permissions
The franchisor should give you a checklist. If they don’t, that’s a red flag.
Cost of Compliance: These licenses aren’t free. Budget:
- ₹50,000-₹1.5 lakhs for all licenses depending on your business type
- CA/Legal fees: ₹30,000-50,000
- Time: 2-3 months minimum
Ongoing Compliance:
- GST returns monthly
- Income tax
- Professional tax
- Employee PF and ESI
- License renewals
If this sounds overwhelming, hire a CA. Factor in ₹15,000-25,000 per month for accounting and compliance.
8. Your Own Skills and Commitment (The Hardest Check)
Be honest. Brutally honest.
Time Commitment:
- Can you work 12-14 hour days for the first year?
- Can you work weekends and festivals?
- Will your family support this?
- Do you have the energy for this?
Owning a franchise isn’t passive income. It’s harder than a job, especially in the first 1-2 years.
Skills Needed:
- People management (Can you hire, train, and manage staff?)
- Customer handling (Can you deal with angry customers calmly?)
- Basic accounting (Can you track daily expenses and revenue?)
- Marketing (Can you promote your business locally?)
You don’t need to be an expert, but you can’t be completely clueless either.
The Lifestyle Change:
- No more regular paychecks
- No more leaves whenever you want
- No more “it’s not my problem”
- Your phone will ring at 11 PM when staff doesn’t show up
Are you ready for this?
I’ve seen people quit their ₹15 lakh per year jobs to buy a franchise, then struggle because they couldn’t handle the operational stress. It’s a completely different life.
9. The Competition Check (Know What You’re Up Against)
Who else is selling what you’re selling?
Walk around your proposed location. Make a list:
- Direct competitors (same product/service)
- Indirect competitors (different product, same customer need)
- How busy are they?
- What are their prices?
- What are they doing better than the franchise you’re considering?
The Reality: Your franchise brand might be famous, but if there are 3 other similar outlets within 1 km, you’re all fighting for the same customers.
Also check:
- What’s coming soon? (New malls, new residential projects, new competition)
- What’s closing? (Are businesses shutting down in this area?)
- How’s the overall economic activity?
A great franchise in a dying location will still fail.
10. The Gut Check (Your Instinct Matters)
After all this analysis, how do you feel?
Excited? Good. Nervous? Normal. Uncomfortable? Pay attention.
Warning Signs Your Gut Might Be Catching:
- The franchisor is pushing you to sign quickly (“Limited slots available!”)
- They’re vague about numbers or won’t give you franchisee contacts
- The agreement heavily favors them
- Existing franchisees seem unhappy but won’t say it directly
- Your family/friends are all saying “don’t do it”
- You’re justifying red flags to yourself
- It feels too good to be true
Trust your instinct. If something feels off, it probably is.
On the flip side, if you’ve done all the homework and you’re genuinely excited (not just caught up in the dream), that’s a good sign.
The Final Reality Check
After going through this entire checklist, you should have:
✅ Clear financial picture (what you need vs what you have) ✅ Real numbers from actual franchisees (not projections) ✅ Reviewed agreement with a lawyer ✅ Verified the brand’s track record ✅ Confirmed strong support system ✅ Approved location with signed lease terms ✅ All licenses and compliance mapped out ✅ Honest assessment of your own readiness ✅ Understanding of local competition ✅ Gut feeling that says “yes, this makes sense”
If you’re missing even one of these, don’t sign yet.
What Happens Next?
Look, I’m not trying to scare you away from franchising. It can be an incredible opportunity. I’ve seen people build amazing businesses and financial freedom through the right franchise.
But I’ve also seen people lose their life savings on the wrong one.
The difference? The successful ones did this homework. All of it. Even when it was boring. Even when it took months.
The ones who failed? They rushed. They got excited. They signed without checking.
Don’t be the second type.
Want someone to review your specific franchise opportunity? I’ve been doing this for 15+ years and I can spot red flags from a mile away. Sometimes you just need an experienced person to tell you “yes, this looks solid” or “run away from this one.”
Let’s talk. No fancy presentations, no sales pitch – just an honest conversation about whether this franchise is right for you.
[Schedule a 30-minute consultation call] – we’ll go through your specific situation, and I’ll tell you exactly what I think. If I see red flags, I’ll say it. If it looks good, I’ll tell you that too.
Because the best franchise investment is an informed one.
About the Author: I’ve spent the last 15+ years helping entrepreneurs across India evaluate and choose franchise opportunities. I’ve seen every type of franchise – the good ones, the bad ones, and the ugly ones. My job isn’t to sell you on franchising. It’s to make sure that if you do invest, you’re making a smart decision with your eyes wide open.