How to Franchise a Business?

Starting a franchise is a lot like launching your own business from scratch. As a franchisee, you get the advantage of a well-known brand and established methods for running things. Plus, as part of a larger company, you benefit from an existing customer base. However, there are some unexpected costs and other factors to consider before you dive in. In this article, we’ll guide you through everything you need to know. You’ll learn how to start a franchise in just eight easy steps!

What Is a Franchise Business?

A franchise business is where the owner allows other people, called licensees, to operate under the brand name and sell its products or services at different locations. Think of places like Baskin-Robbins or CrossFit; each location is a franchise run by its own manager who pays a fee to the main company (the franchisor) to use their brand name.

Here are the key financial aspects to consider when starting a franchise:

• Franchise Purchase Fee: This can range from $20,000 to $50,000, depending on the franchise you choose.
• Minimum Liquid Capital: It’s usually smart to have about $50,000 to $60,000 for a service-based business. If you’re opening a facility-based franchise, aim for $75,000 to $100,000.
• Franchise Royalties: This is a fee you’ll pay regularly to keep your franchise running, typically between 4% and 12% of your location’s profits.
• Additional Expenses: Don’t forget about other costs like renting a commercial space (if needed), hiring staff, and other operational expenses.

Why Start a Franchise?

Starting a franchise has its perks, like being part of a brand that people already know and trust, along with having established processes and plans in place. In many ways, a lot of the hard work is already done for you. But don’t be fooled; starting a franchise isn’t a walk in the park.

You’ll need to factor in the ongoing royalty fees that cut into your profits, so be prepared for that in your budget. Plus, you have to follow the brand’s standards, which means you can’t make too many changes. For those who like to think outside the box, this lack of control can be challenging.

Common Types of Franchises

Food and Drink

The franchise you’ve probably interacted with the most is likely a restaurant or a food store. If you have a favorite fast-food place or a go-to convenience store for snacks, you might already have some fun ideas for your own franchise location. Here are a few popular options:

• McDonald’s
• KFC
• Jersey Mike’s

Business Services

If you’ve been to a UPS store or any other place that helps you with business needs, you’re familiar with this type of franchise. Some examples include:

• Express Employment Professionals
• Real Property Management
• FastSigns

Health and Fitness

Many successful gyms are actually franchises. They offer essential services and create a sense of community, especially for people who are moving to new cities and want to join group fitness classes. Health franchises can also include healthcare services, such as companies that provide home nursing or professional consultations. Some popular choices are:

• Planet Fitness
• The Vitamin Shoppe
• Home Helpers Home Care

Retail

Of course, there are also plenty of well-known retail stores across the country that are franchises. Examples include:

• Edible Arrangements
• Pet Supplies Plus
• Apricot Lane Boutique

And More

Franchise businesses are everywhere, and no matter what type of business interests you, there’s probably a franchise that has carved out a successful niche in the market. Here are a few more options to consider:

• Lapels Dry Cleaning
• SuperCuts
• L.A. Bikini

Franchise Pros and Cons

The best thing about owning a franchise is that you don’t have to start from scratch. You already have the branding and design ready to go, which lets you focus on running the business smoothly.

Another perk is that the franchisor has established relationships with vendors, so you won’t have to spend time finding suppliers or negotiating contracts. In some cases, you might not even get to choose your own vendors for the franchise.

On the downside, you won’t have as much creative control over the business. If you’re excited about creating your own brand identity or designing products, a franchise might not be the best fit for you.

Pros:

• Built-in brand awareness and customer base
• Access to established vendors
• Logo, branding, and style are already set

Cons:

• Higher start-up costs
• Less freedom to innovate
• You have to stick to corporate standards

How To Start a Franchise in 8 Steps

Starting a franchise involves several steps once you decide to go for it. From choosing the right franchise to getting a license and finding a location, planning ahead is key to meeting the franchisor’s standards.

Here’s a simple 8-step guide to help you start your franchise:

1. Research Franchises

You can find different franchise opportunities on websites like Franchise Direct. They categorize franchises by industry, work-from-home options, and lower-cost options. When picking a franchise, keep these important points in mind:

• Industry fees
• Liquid capital needed
• Average monthly or yearly revenue
• Royalty fees
• Marketing fees
• Other costs

2. Evaluate Opportunities

Before starting your franchise, make sure there isn’t already one in your area. Some businesses, like Dunkin’ Donuts, can have multiple locations, but you want to avoid opening a spot too close to a competitor that might struggle.

3. Evaluate Costs

When starting a franchise, you’ll need to keep track of various costs. Besides regular expenses like rent and maintenance, you’ll also pay a yearly royalty to the franchisor. Other costs can include travel, training with the company, and local taxes to get your business up and running.

4. Draft a Business Plan

Even though many aspects of the franchise are already defined, you still need to manage the important parts. Your business plan should explain why you would be a good fit for running the franchise. It’s also important to show your understanding of the community where you plan to operate, as this will benefit the franchise as a whole.

5. Get the Franchise License Agreement

The franchisor will give you a contract to run the business. Before you sign, read it carefully and make sure you understand all the standards expected of you. Knowing what the franchisor requires will help you feel comfortable upholding the business’s reputation.

6. Form a Business Entity

Once you have your business plan, it’s time to create a legal entity like an LLC or corporation. Different franchisors may require different types of business structures, and setting one up will help you organize your expenses.

7. Choose Your First Business Space

With your business operations planned, it’s time to find a location. The franchisor likely has guidelines on the size and setup of the space. If you’re opening a restaurant, there will probably be specific requirements for appliances and amenities to keep your location aligned with the brand..

Also Read: How to Develop New Products or Services?

8. Hire Employees

After finalizing your agreements and finding a location, you can start hiring employees. The franchisor may already have job descriptions and titles set up, making it easier to post job openings and find the right people. They might even have an internal job posting system for employees at other franchise locations who want to relocate.