Many people are drawn to franchising. If it’s right for you, then it can be a road map to a profitable business. You can get a successful business with a track record of success and a strong brand, and still run the marketing yourself.
Buying a franchise means getting on the bandwagon of an idea that’s already proven successful. There are a lot of challenges involved in starting a new franchise and running one. You just have to go into a location, hire some employee, and management team or any other type of business.
So, you’ll have to find the right franchisor if you want to become a franchisee. You want a famous brand or a company with a good reputation for supporting its franchisees.
Following are the steps one must have to do to start a franchising business:
Start searching online
When you open a franchise, the first step is about franchising in general, how it works, what to expect from it, and how to select from all options. Once you know about a few franchises, do your research and choose to open a franchise that fits your needs.
The following are essential factors that you need to consider while choosing a franchise:
- Personal preference – What type of franchise would you like to own (e.g., food business, technology-related products
- Cost of the franchise – What is the total cost of the franchise like the franchise fee, property payment, training expenses, equipment, insurance, and more)?
- Internal policies and other rules – What are the franchise’s domestic policies? Do they work with your management or want the whole team?
Once you have chosen the franchise you want to open, now you have to know every detail about franchising terms and conditions. Every research starts online. You can visit other franchise’s websites and find out more information about them. You can also search for other things such as reviews and testimonials from their previous and existing franchisees.
Franchise Disclosure Statement (FDS)
When franchisors know you are interested, they will give you a Franchise Disclosure Document (FDD). It will tell you about all the franchising rules, fees, responsibilities, and other important information, including their financial and legal history. It is essential to read all the rules and regulations and ensure that you can fulfill your obligations to the franchise.
This is a simple business model. In an essential retail business, a franchisee operates from a mall that sells goods to your customers. For instance, a grocery store, electronics store, or gym could be considered an essential retail business.
Essential retail businesses rely heavily on foot traffic and high visibility to attract customers. For this reason, they work particularly well in populated areas or city centers.
The casual meeting between franchisor and franchisee
Once you choose a franchise you wanted to buy, the franchiser will invite you to a casual meeting, a day-long where you can meet personally. This is your time when you know more about the franchise’s corporate culture, values, policies, and the people you will be dealingwith onwards. The franchisor will also have the chance to know about a better business partner, so you have to be prepared for meeting day
On this day, the franchisor decides whether they want to work with you or not. Some basics like a college degree, business experience, trade certifications, and enough capital to invest), a franchisor will want to know that you’re committed, enthusiastic about products and services, and willing to follow all their policies.
These types of meetings involve group presentations, one-on-one sessions, and visits to existing franchises. Make sure to get your remaining questions answered. After this meeting, franchisors will usually expect you to make a decision. Whether you want a part of their business or not.
A franchisor has some needs of a franchisee before they can offer a franchise agreement. Other characteristic details a franchisor might include:
- Total amount
- Industry experience
- Cash available
- Other sources of income
These may vary depending on the industry you are joining. And it’s best to contact the franchisor you’d like to work with to get more details and an application.
Prepare legal documents and agreements.
After the meeting day, the franchisor presents you with the franchise’s agreement. This is a very formal contract that gives you the legal right to open a franchise usingitsr brand name. It’s wise to consult a lawyer with franchise experience to help with your franchise agreement.
Note all the agreements franchisor made during your meetings and see if they are outlined in the contract or not. For example, if the franchisor promised to provide you legal support for a lawsuit, ensure that this is clearly outlined in the contract. Same for rules on suppliers, pricing, transfer of ownership, protection of territory, royalty fees, hiring of staff, training, etc.
Talk to the franchisor and discuss the contract with them. If there is any contrast between the verbal promises and written agreement, bring them to the franchisor. Negotiate the terms when necessary.
Get your rights from franchise funding.
Before you sign the contract, you must know that you should have enough funds to cover the franchise cost and other expenses.
Following are few financing options to start your franchise:
Rollover for business startups
A Rollover for Business Startups lets you use their funds from your retirement account to invest in your franchise without paying penalties or taxes. They are usually faster to obtain than almost any other startup loan. It is relatively simple to set up, and because it is not a loan, you don’t have to pay back debt or interest.
Another option is to get a loan from the bank. Sometimes it may not be a reliable option, but many banks turn down startups. It will increase your chances of getting a loan, make sure to come in with a robust business plan focused on franchises.
Take a loan from the franchisor
Some franchisors will provide you loans in the form of money that how much you need to open a franchise with them. The benefits of getting a loan from them are that they are already familiar with the brand’s business model.
The select physical location where you open your franchise
After collecting funds, you can sign your franchise agreement and start planning to operate your franchise business. Now, the next and most important step is to choose a physical location. The franchisor will give you some guidelines and recommendations to help you find an ideal location based on their business analysis.
Sometimes Franchisors may have some strict requirements when it comes to a commercial estate site, including the minimum square foot and a certain number of parking slots required.
For instance, the location of a restaurant may have a certain distance from other franchises. The larger is your franchise, the smaller is the protected territory as well. You have to choose a location where there is a lot of ongoing traffic, which can increase your sales.
Take essential training from the franchisor
Another important thing is that you must do to take franchise training programs given by the franchisor. It depends on the franchisor, this may occur before you sign a lease, or while you’re in the process of finding locations.
Training programs will teach you everything you need to know about products or services and train you in marketing, hiring and managing employees, and operations, including the filing of permits, bookkeeping, creating reports, and many more. This type of training contains at least 1 to 2 weeks, with a combination of classroom and on-site training with equipment.
The grand opening of your franchise
Now, the final step is to get your franchise prepared for business. Other things may include all the interior, purchasing equipment, filling inventory, advertising your open jobs, hiring staff, and getting your employees trained, etc. Hiring employees is one of the most challenging and difficult parts of starting a business. The good news is that there are many different ways to find quality employees, both online and offline. Various online hiring platforms have been made available for those who need to hire both low-skilled and professional workers.
At the start, you should spend up to 20% of your first year’s marketing budget for the opening ceremony. This is because the grand opening makes this advertising budget much further than it does later in the year. Ask your franchisor what other successful franchisees have done for their opening ceremonies.
Types of the franchise a franchisee can buy
- Restaurants: McDonald’s, Jack in the Box, Subway, these chains are incredibly popular. In 2014, Subway had the highest number of franchise units in the United States.
- Children’s entertainment areas: These types of franchises play places like adventure play areas.
- Fitness studios: Gyms and various studios for specific activities such as Pilates. Anytime Fitness is a good example.
- Beauty/spa places: Some examples that fall in this category include: Supercuts, a hair salon franchise, and message envy with a variety of services, including massage and spa treatments such as facials.