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Choosing to open a franchise is no mean feat. A lot of money, time, and effort goes into the franchise management process—especially in the beginning when you’re just learning how to start a franchise. Therefore, the most successful franchisees have an independent personality, stellar leadership skills, and lots of determination. They also have a plan. In this guide, we’ll cover the various franchise process steps you need to take to set yourself up for success.
Step One: Determine if the Franchise Lifestyle Is Right For You
Before jumping into any decision, it’s critical that you conduct a thorough investigation of your franchising options and develop a complete understanding of the franchising process. To help get you started, this section will review the different types of franchises, discuss the ups and downs of franchising, and list a few of the most popular options.
Evaluate the Pros and Cons
What Are 3 Advantages of Franchising?
- You benefit from an already established brand, meaning people already trust and love the product or service you’re selling. This means you have to do very little work when it comes to establishing brand loyalty. Y
- You receive substantial support from your parent company. Not only do you benefit from their already successful product and/or business model, you also receive additional training, advice, and industry insights.
- Being your own boss comes with significant perks. Even though owning a franchise is different from starting your own business, you still receive the perks associated with a business owner lifestyle. After your franchise is set up and ready to operate, you can easily set your own hours and take a hands-off approach to daily operations, and complete high-level tasks on your own time.
What Are 3 Disadvantages of Franchising?
- Just like starting your own business, the cost of owning a franchise can be significant. Before jumping into anything, you need to conduct an in-depth review of your finances and consult with a financial advisor to ensure that a franchise makes sense for your budget.
- Since you are working with a parent company, there isn’t a lot of room for creativity or innovation. If you are set on running a business exactly the way you want to, or have your own ideas in mind surrounding what to sell and how to sell it, then you’d be better off using your entrepreneurial spirit to start your own business.
- Lastly, since you are collaborating with a parent company, you cannot sell your franchise whenever you want. Therefore, if you decide to purchase a franchise, you should be in it for the long haul.
We know you don’t want to make this decision on a whim, which is why we want to help offer support where we can. If you’re conflicted, there are resources available to guide your decision. For example, we’ve created a self-survey to determine if your personality and needs fit in with the franchise lifestyle.
What Are the 3 Types of Franchises?
Speaking generally, there are three basic types of franchise organizations that you can choose from:
Product Distribution Franchising
In this model, the franchise hand-delivers the product to the franchisee without the franchisee needing to make anything themselves. The only requirement on your end would be to sell the product. In this franchising model, the franchisor allows you to use its products, logo, and trademark but the format for actually running your business and sales process is left up to you. Here are a few examples of the product distribution model:
- Pepsi
- Ford
- John Deere
Business Format Franchising
Different from product distribution franchising, the business format model provides you with a standardized business model to follow. The parent company (franchisor) dictates how you operate your business to properly provide their services, while you independently manage day-to-day operations. This means that your goal is to make sure all of your processes and daily operations consistently represent the parent company’s brand standards. This model often works best when selling services instead of individual products. Here are some examples of business format franchises:
- Papa John’s Pizza
- Great Clips
- Subway
Social Franchising
If you are passionate about philanthropy or social advocacy, then this model of franchising is likely to be a good fit for you. Social franchises are companies who focus on delivering life-sustaining services and products to people who are financially disadvantaged. The social franchising model itself mimics the structure of the business format franchising but focuses on delivering basic-need services like:
- Affordable educational services
- Grocery/meal services
- Clean drinking water and sanitation services
Choose What Works Best For You Personally
Within these three general franchise models, there are thousands of brands for you to choose from. This can be quite overwhelming at first, so it’s important to stick to some guidelines as you review your options:
- Choose an industry that you have experience in.
- Consider where you live and what your community would be interested in.
- Factor in your lifestyle, values, and interests.
Take a Look at Some of the Best Franchises To Own
Now that we’ve discussed the different basic types of franchises, let’s take a look at some of the top franchise brands available on our website to purchase today.
If you are a fashion-forward individual with a passion for apparel, then Apricot Lane would be a great franchise to pursue. Known for bringing in all the latest trends much faster than their competitors, Apricot Lane has already cultivated a band of loyal customers.
Passionate about alternative energy and helping the planet? If so, you should consider the solar power business. With a Solar Grid franchise, you’d be joining a thriving enterprise. In fact, the solar power industry is experiencing a record-breaking annual growth rate of 48%—and is projected to account for half of renewable energy generation by 2050.
Want to turn your dog training experience into a profitable business? Then buying a Zoom Room franchise is your answer. This venture-backed indoor dog training gym focuses on educating and “training” dog owners to help their pets have the time of their lives.
If helping people by operating a business is one of your life goals, then you should look into 911 Restoration. 911 Restoration is a disaster restoration company that strives to make lives better by providing water and fire damage restoration services.
As you can see, the possibilities are endless when it comes to choosing a franchise. No matter what your skills are or what you’re passionate about, there’s a franchise for you. You can explore all of your options on our website. Realizing your dream of owning a business could be just a few clicks away.
Step Two: Review the Requirements To Start a Franchise
Once you’ve determined if franchising is the right path for you and you’ve narrowed down your options, it’s time to review the individual legal, financial, business, and personal requirements associated with buying a franchise.
The Legal Requirements To Start a Franchise
When going through the franchise purchasing process, you will encounter many complex legal documents. Therefore, you will need to consult with a franchise attorney, your personal attorney, and your personal accountant before signing any official paperwork or finalizing any decision. Through these legal proceedings, your attorney, the corporate franchise attorney, and your accountant will review the following two main franchising legal documents:
- The Franchise Disclosure Document (FDD): This document is what lays out the terms of your relationship with the franchise parent company. This document explains:
- The different types of fees associated with your particular agreement
- How the franchise’s business model is set up
- The various commitments and expectations associated with your business relationship. This includes building specifications, brand compliance, and more.
- The Franchise Agreement: This agreement contains all of the terms, conditions, rights, and obligations pertaining to the business relationship between yourself and the franchise parent company.
We should note that this is a very brief overview; to learn more about the specifics of franchise legal processes, you should review our comprehensive resource.
The Financial Requirements To Start a Franchise
How much money do you need to start a franchise? Of course this varies from franchise to franchise, but many standard costs are incurred throughout the franchise life cycle. Here is what you should plan to pay for:
Up-front Costs
The franchise fee is the up-front licensing fee you pay to establish and maintain your relationship with your parent company’s brand. Once you pay this fee, you’re on your way to becoming a member of that franchise’s business family. The fee amount typically ranges anywhere from $20,000 to $50,000. You can think of it this way, the cost of your franchise fee really depends on the type of franchise, and how established the franchise parent company is.
Royalty Payments
Since a franchise opportunity branches off of the parent company’s original business model and idea, you are required to pay royalties out of your gross monthly earnings. The exact amount you need to pay will be outlined in your franchise agreement. This looks different for each franchise, so it’s important to ask questions and conduct your own research before getting too far along in the purchase process.
Building Costs
One of the most time and cost intensive aspects of owning a franchise is the development of your location. The exact cost of creating your storefront depends on a number of factors including:
- The cost of land or rental space in your specific location. For example, buying or renting property in Los Angeles is likely to be more expensive when compared to Bismarck.
- The cost of the build or renovations is also something to consider. In most cases, building out a location from scratch is more expensive than renting out a pre-built space.
- The specific design of the franchise’s storefront also contributes to the cost. For example, the design of a Rainforest Cafe is very specific and extensive since it’s a jungle themed restaurant.
Staffing Costs
As a franchise owner you are responsible for recruiting and maintaining your workforce. As with all of these costs, the specific hiring amounts vary greatly from franchise to franchise. However, it is standard procedure that payroll service costs are outlined in the franchise disclosure document (FDD).
Inventory Costs
The cost of supplies can be extensive, depending on the industry of your franchise. For example, in the restaurant industry the cost of ingredients, kitchen, and dining supplies can add up quickly. However, if you enter into a vending machine franchise, the inventory costs are likely to be less expensive, but the overall profit you make on an individual purchase will be smaller compared to a restaurant.
The Business Requirements To Start a Franchise
To ensure that you’re organized and ready to run your franchise business, it’s a best practice to create a business plan. This plan will outline expectations and prepare for potential challenges. However, every franchise business plan looks different. For example, a business plan for a franchise restaurant looks completely different compared to a business plan for a flower shop. However, a few basic steps are involved when you’re learning how to create a franchise business plan:
- Write your executive summary: This summary should be short and to the point, describing your business objectives and your product or service.
- Write your business description: In this section, you will describe what the franchise has to offer, its history, market conditions (past, current, and future), and identify any potential risk areas. This is a great way to prove that you know your stuff and are truly invested in working with this franchise.
- Write your management summary: Although this is dictated by your franchisor, you should still include this section to highlight how your specific experience aligns with the parent company’s management philosophy.
- Write your sales and marketing statements: In this section, you describe how you plan to use your franchisor's specific sales and marketing tactics and supplies to drive people to your business. It’s important to include a few questions in this section to determine how much your parent company will help you spread the word and attract customers.
- Outline your financial needs and projections: In this section, you will include your profit and loss statement (P&L), balance sheet, and cash flow statement. You should lay out all of the costs associated with operating your business from start to finish and calculate exactly how much capital you need to operate during your first year as a business. After this is outlined, you can then explain how much you profit from your project during your first year. Before making this projection, you can always ask your franchiser for advice and even set up meetings with other franchise owners to benefit from their insight.
The Personal Requirements To Start a Franchise
Owning a franchise business requires you to learn and grow on a personal level as well. After your franchise agreement has been signed and your relationship with the franchise has been established, you will go through extensive training at the franchise’s headquarters. This is where you will hone your skills as a business owner and learn the tricks of the trade when it comes to running your particular franchise. But your personal learning journey shouldn’t stop here. As a franchisee, you should continue to invest in your professional development. This continued education can take many different forms including:
- Getting involved with local business associations in your community
- Attending franchising conferences and other events
- Staying informed about the latest developments and trends in your industry
Step 3: Set Your Franchise up for Continued Success
Getting your franchise operation up and running is a huge accomplishment. However, your work doesn’t stop there. If you want to achieve profitable franchise growth and perpetuate stability, then you should:
- Prepare to be flexible. Adopting a flexible approach to serving your customers will help your business adapt to continual changes in your selling environment. For example, during the COVID-19 pandemic many restaurant franchises found new ways to make their delivery and take-out capabilities more efficient and safer for their workers and customers.
- Regularly communicate with your customers. Your customer’s satisfaction and happiness are directly linked to your business’s continued success. This may seem like a no-brainer, but many business owners forget this important step. Increasing your communication with customers strengthens opportunities to develop meaningful connections. Improving your customer service training, and creating customer loyalty programs, are both examples of how you can better connect with your customers.
- Have a survival plan. Any business owner should place great value on long-term planning and maneuverability. Economic disruptions are inevitable, but if you plan ahead and develop a plan that focuses on long-term sustainability, then your business will be better protected. When creating your survival plan, it’s important to lean on leaders in your franchise community who have carried their businesses through all kinds of economic strife.
With a Solid Plan in Place, You’re Open for Business
If you possess the drive and passion needed to run a business and are willing to put in the work to develop your franchise plan, then you’re ready to succeed. Regardless of where you are in your franchise journey, we’re here to help. If you’re still searching for a franchise that is a perfect fit for you, then feel free to visit FranchiseOpportunities.com to explore your options. Check out our resources page for more information about the franchising process, or reach out to us directly and we’ll work with you to create a customized franchising opportunity that meets your goals.