The Complete Franchise Investment Checklist for the UK

18th June 2025

Buying a franchise can be a fantastic way to run your own business without starting from scratch, but you need to do your homework first. This guide walks you through everything you should consider before putting your money down.

The Smart Way to Start Your Own Business

Franchising is absolutely thriving in the UK right now. According to the British Franchise Association’s National Survey 2024, the industry contributes £19.1 billion to our economy, with the average franchise turning over £400,000 per year. Here’s something that might surprise you: 92% of franchises are still operating after two years, compared to just 80% of independent businesses. That’s a pretty compelling success rate.

But before you get too excited, remember that success isn’t automatic. Whether you’re looking at a small cleaning business that costs a few thousand pounds or a major food brand requiring a six-figure investment, the key is doing proper research and asking the right questions.

Step 1: Are You Ready for Franchise Ownership?

Before you start browsing franchise opportunities, you need to take a hard look at yourself and your circumstances. Franchise ownership isn’t like having a regular job, and it’s definitely not a passive investment.

Your Financial Situation

Let’s talk about money first. Most banks and lenders expect you to put up at least 30% of the total setup costs from your own savings, not money you’ve borrowed from elsewhere. So if a franchise costs £60,000 to set up, you’ll need £18,000 of your own cash.

But that’s just the start. You also need enough money to live on whilst your business gets established. Many franchise owners don’t take a proper salary for the first year or more. Can you manage your mortgage, bills, and family expenses during this period?

Don’t forget about unexpected costs either. Equipment breaks down, you might need extra stock for busy periods, and there are always surprises when you run a business. Having a decent emergency fund isn’t just sensible – it’s essential.

Your Personality and Skills

Franchising requires a particular mindset. You’re buying into someone else’s proven system, which means following their rules and procedures. If you’re the type who always wants to do things your own way, franchising might frustrate you.

Think about your work ethic, too. Most successful franchise owners work longer hours in their first few years than they ever did as employees. Are you prepared for early starts, late finishes, and working weekends when necessary?

You don’t necessarily need experience in the specific industry, but you should have basic business sense or be willing to learn quickly.

How This Will Affect Your Life

Running a franchise will change your lifestyle, probably more than you expect. Many new franchise owners underestimate the time commitment, especially in the early years. If you’ve got young children or other significant commitments, think carefully about how you’ll balance everything.

Some franchises offer more flexibility than others. A home-based business consultancy might give you more control over your hours than a high-street coffee shop that needs to be open from 7 am to 7 pm every day.

Step 2: Research Your Market and Choose the Right Franchise

Understanding Different Industries

Once you’ve decided you’re ready for franchise ownership, it’s time to research different sectors. Some industries are growing rapidly, others are mature and stable, and a few might be in decline. You want to pick a sector with good long-term prospects.

Think about how economic ups and downs might affect the business. Luxury services often struggle during recessions, whilst essential services like cleaning or repairs tend to be more resilient. Some businesses are highly seasonal, which might suit you if you want to take long holidays, but could be challenging if you need steady income throughout the year.

Look at what’s happening with technology and social trends, too. The rise of home working has been brilliant for some franchises (like home fitness or business services) but challenging for others (like city-centre sandwich shops).

Choosing the Right Franchise Brand

Not all franchises are the same, even within the same industry. Some have been around for decades and have rock-solid systems, whilst others are newer and still working out the kinks. Both can be successful, but they represent different levels of risk.

Brand recognition matters more for some businesses than others. Everyone knows McDonald’s, but you probably don’t know the name of your local plumber’s franchise (and that doesn’t affect their business). Think about whether brand recognition is important for the type of franchise you’re considering.

Look at how the franchise network is growing. Rapid expansion can be exciting, but it can also mean the franchisor is stretching its support resources thin. Steady, controlled growth is often a better sign.

Location Matters

If your franchise needs a physical location, this becomes crucial. You need to understand your local market inside and out. Who are your potential customers? Do enough of them live or work nearby? How easy is it for them to reach you?

Competition isn’t necessarily bad – sometimes being near competitors can actually help by creating a destination area. But you need to understand what you’re up against and how you’ll stand out.

Think about the future too. Is the area developing or declining? Are there major changes planned that could affect footfall or customer access?

Step 3: Understand the Complete Financial Picture

What Will This Really Cost You?

The franchise fee is just the tip of the iceberg. You’ll also need money for equipment, initial stock, shop fitting, professional fees, marketing your launch, and working capital to keep you going until the business becomes profitable.

Here’s what a typical franchise investment includes:

Upfront Costs:

Franchise fee (this buys you the right to use the brand and system)
Equipment and fixtures
Initial inventory/stock
Shop fitting and signage
Legal and accounting fees
Launch marketing costs
Working capital for the first 3-6 months

Monthly Ongoing Costs:

Royalty fees (usually 4-8% of your monthly turnover)
Marketing levy (typically 1-3% of turnover)
Rent and utilities
Staff wages
Insurance premiums
Stock replenishment
Equipment maintenance

How to Fund Your Franchise

Unless you’re financially secure, you’ll probably need to borrow some money. The good news is that banks generally prefer lending for franchises because they’re seen as lower risk than independent start-ups.

The major high street banks (Barclays, HSBC, Lloyds, NatWest, RBS) all have specialist franchise teams who understand the industry. They’ll want to see a solid business plan and evidence that you’re serious about making it work. Most will lend up to 70% of the total setup costs.

If the banks say no, don’t give up. There are government-backed schemes that can help:

Start Up Loans: Up to £25,000 for viable business plans
Enterprise Finance Guarantee: Can back loans up to £1 million where security is an issue
Local Enterprise Partnerships: Support available in your specific area

Alternative lenders are another option. They’re often quicker and more flexible than banks, but you’ll usually pay higher interest rates.

Making Sure the Numbers Actually Work

This is where you need to get realistic about what the business might earn. The franchisor should provide some financial projections, but remember they’re trying to sell you a franchise, so they’ll present the best-case scenario.

Try to build your own financial model based on what existing franchisees tell you they actually earn. Work out how long it will take to break even, what your monthly cash flow will look like, and what happens if sales are 20% lower than projected.

Don’t forget to factor in your own salary. Many new franchise owners make the mistake of thinking all the profit is theirs to take home, forgetting they need to pay themselves a wage first.

Step 4: Understand UK Franchise Law and Regulations

How Franchising Works Legally in the UK

The UK takes a fairly relaxed approach to franchise regulation compared to some other countries. There aren’t specific laws governing franchising – instead, franchise agreements are treated like any other commercial contract under general contract law.

However, this doesn’t mean it’s a free-for-all. Competition law still applies, so franchisors can’t engage in anti-competitive practices. If your franchise involves certain industries like food service or financial services, you’ll need to comply with the relevant sector regulations.

The lack of specific franchise laws means it’s even more important to get proper legal advice before signing anything.

The British Franchise Association (BFA)

While membership isn’t compulsory, the British Franchise Association acts as the industry’s ethical watchdog. BFA members have to follow a strict code of ethics and undergo regular checks on their franchise systems.

If a franchisor isn’t a BFA member, that’s not necessarily a red flag, but you should ask why. Some perfectly reputable franchisors choose not to join, but membership is generally seen as a mark of quality in the industry.

Franchise Disclosure Documents

Unlike the US, UK franchisors aren’t legally required to provide a formal disclosure document, but ethical ones will give you comprehensive information about the business anyway.

A good disclosure document should tell you everything important about the franchise: the company’s history, financial performance, any legal issues, what support you’ll get, and what your obligations will be. If a franchisor is reluctant to provide detailed written information, that’s a major red flag.

Step 5: Evaluate the Franchisor Properly

Research the People Behind the Business

Franchising is ultimately about relationships, so you need to understand who you’re getting into business with. Research the franchisor’s management team. What’s their background? Have they successfully run franchises before, or is this their first attempt?

Look into their financial history, too. Have any of the key people been involved in business failures or bankruptcies? This information is publicly available through Companies House.

Don’t be put off by past business failures entirely – many successful entrepreneurs have had failed businesses in their history. But you want to understand what happened and what they learned from it.

What Support Will You Actually Get?

One of the main reasons for buying a franchise is to get ongoing support, so you need to understand exactly what that looks like. Initial training is important, but what happens after you’re up and running?

Good franchisors provide comprehensive training that covers not just the technical aspects of the business but basic business skills like marketing, staff management, and financial planning. They should also offer ongoing support through regular business reviews, help with problems, and updates to systems and procedures.

Marketing support can be particularly valuable. National advertising campaigns that you could never afford individually can drive customers to your business. But check what the marketing levy actually pays for – sometimes it just covers the franchisor’s marketing department salaries.

How Do They Treat Their Franchisees?

Pay attention to how the franchisor communicates with you during the sales process. Are they professional and transparent, or do they use high-pressure tactics and make unrealistic promises? How they treat you now is probably how they’ll treat you as a franchisee.

Ask about their franchisee satisfaction levels and staff turnover. High-quality franchisors are usually happy to share this information because they’re proud of their relationships with franchisees.

Step 6: Talk to Current and Former Franchisees

This is absolutely crucial and often reveals more than all the official documentation combined. Any reputable franchisor should be happy to put you in touch with current franchisees. If they won’t, walk away immediately.

Essential Questions for Current Franchisees

When you speak to existing franchisees, ask specific questions about their experience:

How do their actual earnings compare to what they were originally told to expect?
What unexpected costs have they encountered?
How helpful is the ongoing support from the franchisor?
How many hours per week do they typically work?
What’s the most challenging aspect of running this franchise?
If they had their time again, would they still buy this franchise?
What advice would they give to someone in your position?

Don’t just ask one franchisee, try to speak to several, including some who’ve been in the system for different lengths of time.

Learning from People Who Left

If possible, track down some former franchisees, too. The franchisor probably won’t volunteer this information, but you might find them through online searches or business networks.

Former franchisees can give you insights into potential problems with the system. Why did they leave? Was it because the business didn’t work, or were there issues with the franchisor? How did the franchisor handle their departure?

Warning Signs to Watch Out For

Be concerned if you notice multiple franchisees have left the system recently, especially if they’re reluctant to explain why. High turnover often indicates problems with the franchise model or poor franchisor support.

Also watch out for franchisees who seem coached in their responses, or who are reluctant to give you honest feedback about challenges they’ve faced.

Your Complete Due Diligence Checklist

Here’s a practical checklist to work through as you evaluate any franchise opportunity:

Financial Due Diligence:

Get written details of all costs (initial and ongoing)
Speak to at least 3 current franchisees about actual earnings
Create realistic financial projections for 3 years
Confirm financing arrangements before signing anything
Understand exactly when and how royalties are calculated and paid

Legal Due Diligence:

Get the franchise agreement reviewed by a specialist lawyer
Understand your territory rights and any limitations
Check what happens if you want to sell the franchise
Understand termination conditions and notice periods
Review any non-compete clauses

Operational Due Diligence:

Visit existing franchise locations during busy periods
Understand exactly what training and support you’ll receive
Check what marketing support is provided and what you’ll pay for it
Understand staffing requirements and local labour availability
Review equipment and technology requirements

Market Due Diligence:

Research your local market and competition thoroughly
Understand seasonal variations in the business
Check planning permissions if you need specific premises
Research demographic trends in your target area
Understand how economic changes might affect the business

Final Questions Before You Decide

Before you make your final decision, make sure you can honestly answer these crucial questions:

Do you fully understand the total cost? Including working capital and your living expenses during the setup period?

Have you spoken to enough existing franchisees? To get a realistic picture of what the business is actually like to run day-to-day?

Are you comfortable with the level of control? The franchisor will have a say in how you operate your business.

Do you understand your territorial rights? And whether the franchisor can operate competing businesses nearby?

What’s your exit strategy? Can you sell the franchise, and under what conditions?

Are you prepared for the commitment? The time investment and lifestyle changes that come with running your own business?

Making Your Final Decision

If you’ve worked through all the research and due diligence, you should have a clear picture of whether this franchise opportunity is right for you. Don’t rush the decision – a good franchisor will give you time to consider everything properly.

Remember that buying a franchise is a long-term commitment. Most franchise agreements run for at least five years, and some are much longer. Make sure you’re not just happy with the opportunity as it stands today, but confident it will still work for you in several years’ time.

If anything doesn’t feel right, trust your instincts. There are plenty of franchise opportunities out there, so don’t settle for one that doesn’t tick all your boxes.

Ready to Explore Franchise Opportunities?

If you’ve worked through this checklist and feel ready to take the next step, consider exploring opportunities in growing sectors like pet services.

Discover a Rewarding Franchise Opportunity with Petpals

Are you passionate about animals and looking for a business opportunity that combines purpose with profit? Petpals offers one of the UK’s most established and successful pet care franchise opportunities.

With over 30 years of experience, Petpals has built a trusted brand that pet owners throughout the country rely on for professional, caring services, including dog walking, pet sitting, and home visits. As a Petpals franchisee, you’ll join a supportive network of like-minded business owners who share your love of animals.

What makes Petpals special:

Comprehensive training and ongoing support
Exclusive territory rights in your local area
Strong brand recognition and customer loyalty
A flexible business model that can grow from home-based to multi-staff operation
Part of the thriving pet care industry

The pet care sector continues to grow as more people welcome pets into their families and seek professional services to help care for them. This creates excellent opportunities for dedicated franchise owners who want to build a meaningful business.

Ready to learn more? Contact us today and discover how you could become part of the Petpals family and start your journey as a successful pet care franchise owner.