Thinking of starting a franchise business, but not sure where to begin? We understand that the prospect of opening a franchise can seem daunting, especially to newbies. After all, you will probably be investing your hard-earned money in this small business venture. But, worry no more! This guide will help you understand the process of franchising.
What Does Franchise Mean, Exactly?
A franchise involves two parties – one business (the franchisee) pays another company (the franchisor) to use its trademarks and business model.
The franchisor provides training programs, marketing, support services, and other forms of assistance. It is like working for yourself but not by yourself. Your franchise may be your responsibility, but you have to follow a business plan set out by the franchisor. Utilizing this plan will make it much easier for you to start a small business.
What are the Benefits of Starting a Franchise?
One of the benefits of franchising is that you don’t have to build everything from the ground up. Think about it as baking a pie. Making the dough from scratch is half the work. It will take a lot of energy, and you’re not even sure it’s going to come out right. Buying a ready-made crust, or in this case, a franchise, will save you half the prep time. You do not have to be an experienced entrepreneur to be successful in your business endeavor!
Established brands provide a franchisee with a strong support structure. Franchisees will have access to the expertise of an experienced team of professionals while staying in charge of the operations. The franchisor will give you the blueprint that helped them succeed. These professionals can assist in the financing, franchise location selection, design, construction, employee training, and opening.
Another advantage of owning a franchise is the familiarity that comes with the name of the franchisor. There will be no need for aggressive marketing campaigns employed by actual startups. You are already popular, my friend! It will be easier to catch up with existing businesses, given your reputation. More likely than not, the franchisor already has a loyal customer base that you can tap into. As a new franchisee, marketing is less of a priority. The community members will simply come for the products and services you offer! As soon as you sign for that franchising deal, you will hit the ground running.
An additional benefit to starting a franchise is more accessible access to business loans and other financing options. Lenders are more willing to invest in franchisees. There is less risk involved in supporting a business model that has a proven track record.
The best thing about owning a franchise unit is that it allows you to become your own boss. You’ll have a flexible schedule and more control of your day-to-day life. You do not have to worry about impressing your superiors because you are the owner, and you call the shots!
Steps to Becoming a Franchisee
Becoming a franchisee can be confusing, but we’re here to help you through the steps on how to start a franchise! Before picking a brand and paying your franchise fee, a lot of research and planning should go into your final franchising decision.
1. What is the Best Franchise for You?
There are so many types of franchises to choose from. Yes, this opens your world to unique opportunities. But at the same time, we understand how overwhelming it can be to pick just one out of the vast selection.
The first step is to establish your personal goals. Do you want to invest in a franchise that will increase your net worth? Do you want to have a small business that will give you more free time to spend with your family and friends? Or do you simply want to fulfill a life-long dream of becoming a business owner? Whatever it is, your first franchise should enable you to reach your goal.
Start by selecting the industry you want to be in. Do you see yourself in the food and restaurant business? Health and wellness? Education? It makes much more sense to open a cafe instead of an eye care center if you identify as a javaphile (coffee-lover). If you are an optometrist, you should opt for a franchise specializing in eye care services. Choosing a franchise system that aligns with your interests, skills, and experiences is very important.
Need help narrowing down your franchise options, take our quiz to get tailored recommendations for you.
2. Contact a Franchisor
Reaching out to the franchise company is the next big step. It should be easy to find their contact information online, thanks to Google! To express your interest in franchising, schedule a meeting and prepare to comply with the requirements.
As the potential franchisee, you will be soliciting information about the franchisor. This will help you fully grasp how the franchise operates and what it stands for. Gauge how much the franchisor cares about your professional success based on your conversations. By the end of this phase, both parties will determine if the business relationship proves to be a good fit or not.
3. Funding and documentation
Now it is time for some real talk. What is your financial capacity to start a small business franchise? See, one of the cons to opening a franchise is the steep cost you need to pay upfront. Franchisees will need to have a certain amount of capital to make this possible. Most franchises run from about $50,000 to $200,000, but it varies depending on the products and services they offer.
The franchisor will present an itemized list of all expenses that will go into starting the business. The list will include supplies and equipment, real estate, and so forth. Of course, there is the initial franchise fee. Paying the franchise fee will give you the right to use the brand and receive management support.
Franchise fees may vary from industry to industry and from the profitability of your niche market, but making sure that you have a substantial capital investment will ensure that the process goes as smoothly as possible. Don’t forget about the hidden start-up costs required in running a new franchise! Think about the royalty fees, utilities, and lease. Also, consider the cost of marketing and employee salaries. If you do not have the starting capital to jumpstart your business, some possible sources include borrowing from relatives, banking institutions, or finance companies.
Lastly, when you get hold of your starting capital, carefully review the Franchise Disclosure Document (FDD) before signing off. You may need a franchise attorney for this.
How Long Does it Take to Franchise a Business?
The decision leading up to picking the right franchise may be indefinite. It depends on how fast you and the franchisor move the process. Researching the market field will take a couple of weeks to a month. Getting funding and signing the needed documents may vary depending on the franchisee’s financial situation. Approximately, this would take two weeks to a month. Consultation and negotiations with the franchisor will take two weeks each approximately. But make sure you devote half a year to a year’s worth of your time for the entire process. When all of this is done, you will be ready for your grand opening!
Should I Start a Franchise?
If you want to eliminate some of the risks associated with starting a business, franchising is the way to go! If you do not have any business experience but want to be an entrepreneur, franchising could work perfectly. If you have the time, money, and energy to run a business but simply do not know where to start, franchising will allow you to make things happen!
If you want to have 100% freedom to make business decisions, franchising may not be for you. You are technically the boss, but there are standard operating procedures attached to the franchising contract that you have no control over. If you want your business to be an avenue for creativity and self-expression, starting a franchise with a strict operations manual may not make you happy in the long run. In the end, it goes back to what your goals and motivations are in starting your own business.
You now have a better understanding of how to open a franchise. It might seem terrifying at first, but you will just keep getting better with time and experience. Remember that as a franchise owner, you are not alone in the process. The franchisor will be there every step of the way to guide you towards success!