The 7-point filter that saved me from franchise disasters

Most people spend more time researching a new phone than a $100K–$500K franchise decision.

That's insane.

They rely on glossy brochures and smooth-talking sales reps instead of actual data, and then wonder why they're bleeding cash 18 months later.

After working on over 10,000 franchise sales and building multiple brands, I've seen every flavor of disaster. 

But I've also seen what makes winners.

The difference is in a systematic approach to evaluation. 

Not gut feelings. Not FOMO. Just thoughtful, process-based analysis.

Here's my 7-point franchise filter that separates gold from garbage:

1. Unit Economics (The Only Filter That Matters) Look at Item 7 and Item 19 in the FDD. Some franchisors show only top performers. Others show full P&Ls for every location. Guess which ones you trust?

2. Franchisee Validation Ask current owners: "Would you do it again?" I've met franchisees crushing it financially who say no because the lifestyle kills them. And struggling owners who say yes because they finally control their destiny. The answers you get will tell you who you'll become in this business.

3. Leadership Credibility You need both: founders who know the business AND people who've scaled franchises. One without the other is a red flag. At minimum, they need a team of advisors who've actually built brands—not just theorists.

4. Real ROI Timeline Not just profit - when do you get your full investment back? Including bank loans. Including opportunity cost. The real number.

5. Strategic Moat Territory protection isn't a moat. Brand recognition isn't enough. You need proprietary tech, exclusive partnerships, or unique equipment that competitors can't touch.

6. Support That Drives Revenue Everyone offers "training." You want proactive support that helps you grow year-over-year, not just compliance cops.

7. Exit Value Think like a builder, not just an operator (remember our newsletter from a couple of weeks ago?) Cash flow is great, but asset value is where real wealth gets built. Can this business sell for a premium when you're ready to exit? Or will it die when you're done? The businesses worth the most are the ones that run without you in them every day.

Treat franchise evaluation like the major investment it is. Run every opportunity through these 7 filters before you sign anything. 

Because once you're in, you're in.

Until next week,

Erik

PS: If you want to see how real franchise owners apply this framework, check out our private Facebook group. It's where we break down actual FDDs, share validation strategies, and help each other spot winners from traps.