How to Buy a Franchise in the U.S.: New Unit or Resale

To buy a franchise, you choose a brand, review its Franchise Disclosure Document (FDD), speak to existing franchisees, confirm the total investment in Item 7, sign the franchise agreement and open a new unit, or buy an existing unit as a franchise resale with the franchisor’s approval. A resale adds operating history; a new unit adds ramp-up risk. Both can support an E-2 visa when structured correctly.

Franchises are one of the most common routes for foreign investors because they come with a tested model, training and brand recognition. They also come with rules, fees and a contract that favors the franchisor. Understanding both sides before you sign is the point of this guide.

How do I buy a franchise, step by step?

1. Set your budget and role. Decide what you can invest, how much you want to work in the business and which industries suit you.
2. Shortlist brands or resale units. Compare concepts that fit your budget, market and E-2 plans; a structured business search helps when you are looking at resale units.
3. Get and read the FDD. Under the FTC Franchise Rule, the franchisor must give you the FDD at least 14 calendar days before you sign a binding agreement or pay any money.
4. Call franchisees. Item 20 lists current and former franchisees; call both.
5. Check territory and site. Confirm the protected territory and, for new units, the location and lease.
6. Have the FDD and agreement reviewed by a franchise attorney and the numbers by an accountant.
7. Sign, train and open, or for a resale, complete due diligence on the unit and close with franchisor approval.

What is the FDD and which items matter most?

The Franchise Disclosure Document is required by the FTC Franchise Rule (16 CFR Part 436) and has 23 standard items. Several states, including California and New York, also require franchisors to register or file the FDD with a state agency before selling there.

Item 19 is optional. If a franchisor does not include financial performance representations, it generally may not give you earnings claims outside the FDD. That is not automatically a warning sign, but it means you must build your own estimate from franchisee conversations.

Item 7 is the budget. The franchise fee is often a small part of the total. Build-out, equipment, inventory, deposits, opening marketing and “additional funds” for the first months make up the rest.

How much does it cost to buy a franchise?

Costs vary enormously by brand and format, from home-based service concepts to restaurants and hotels requiring a large build-out. The franchisor’s estimate in Item 7 is a range; use the upper end for planning, and add a reserve for a slower ramp-up than the brand projects.

Ongoing costs matter as much as the entry cost. Royalties are usually a percentage of gross sales and are paid whether or not the unit is profitable, plus contributions to a marketing fund and technology fees listed in Item 6. A unit with strong sales and thin margins can leave the owner with little after these fees.

Should I buy a new franchise or a franchise resale?

A resale is an acquisition of an operating business inside a franchise system. It needs the same due diligence as any business purchase (verified earnings, lease, staff, liabilities) plus a review of the franchise agreement, the remaining term, any defaults with the franchisor and the transfer conditions in Item 17. Our page on buying a franchise resale covers this in detail, and our guide to buying vs starting compares the broader trade-offs.

What questions should I ask when buying a franchise?

To current and former franchisees:

• What were your revenue and margins in years one, two and three?
• How long did it take to break even, and how much cash did you need beyond Item 7?
• Is the training and support what the FDD describes?
• Which fees or requirements surprised you?
• Would you buy this franchise again?

To the franchisor:

• Why did units close or transfer in the last three years (Item 20)?
• How is my territory protected, and can the brand sell online or through other channels into it?
• What remodel or technology upgrades will be required during the term?
• What are the conditions and fees for transfer if I sell later?
• How do you approve buyers who are foreign investors relocating on an E-2 visa?

What makes a good franchise to buy?

There is no universal best franchise. A good fit combines a system where most franchisees are profitable and would buy again, stable or growing unit counts, a manageable Item 3, a total investment you can fund with a reserve, and a role that matches your skills. For foreign buyers, also check whether the franchisor has approved non-resident or E-2 franchisees before and how long its approval process takes.

How does buying a franchise work for an E-⁠2 visa?

Franchises are commonly used for E-2. The usual rules apply: the investor must own at least 50% or have operational control, the investment must be substantial, at risk and irrevocably committed, the source of funds must be documented and the business must not be marginal. Loans secured by the business’s own assets do not count toward the investment.

For a new unit, the investment is shown through funds spent or committed: the franchise fee paid, lease signed, build-out contracted and funds in escrow if needed. A credible business plan shows the path beyond marginality. For a resale, the unit’s history does much of that work, and a visa-contingent escrow can protect the purchase price until the visa is issued. Franchisors, landlords and sellers must all accept the timeline. Your immigration attorney prepares the filing; see businesses that fit E-⁠2 requirements.

Next step

TealBridge helps foreign investors choose between franchise brands and resale units, read the FDD’s numbers critically, verify a resale unit’s earnings through due diligence, and negotiate terms with the seller as your buy-⁠side advisor. Your franchise attorney reviews the agreement, and we coordinate the franchisor approval and closing. We are not a franchise broker and do not take commissions from franchisors or sellers. Contact us to discuss the franchises you are considering.