Thinking About Starting a Franchise? Here’s Where to Begin
Have you been thinking about starting a business and are considering buying a franchise, but don’t know how to begin? For first-timers, getting into franchising can seem overwhelming. After all, you’re an aspiring business owner, while franchise companies are often big, well-known brands. This guide will walk you through each step, helping you understand what’s involved in starting a franchise.
What Is a Franchise?
In a franchise setup, one business (the franchisee) pays another business (the franchisor) to use its name, business model, and system. In return, the franchisor offers support such as training, guidance, and marketing services.
You may have heard the saying: “In a franchise, you’re in business for yourself, but not by yourself.” That’s true—while you run the business, the franchisor gives you a proven system to follow, making it easier to get started and grow.
Types of Franchises You Can Choose From
When most people think of franchises, they usually picture fast-food chains like Subway or Burger King. While food franchises are very popular, there are franchises in nearly every industry. Here are some examples:
- Business Services: The UPS Store, Express Employment Professionals
- Travel Agencies: Dream Vacations, Avoya Travel
- Convenience Stores: 7-Eleven, Circle K
- Education: Kumon, theCoderSchool, School of Rock, Mathnasium
- Health and Fitness: Anytime Fitness, Pearle Vision, Sports Clips, Massage Envy
- Home Health Care: Nurse Next Door, Right at Home, BrightStar
- Entertainment: Painting with a Twist, Wine & Design
- Pet Care: Dogtopia, Camp Bow Wow
- Real Estate: RE/MAX, Keller Williams
- Retail: Ace Hardware, GNC
Each franchise has its own business model, support system, and structure. That means you have many options to choose from depending on your interests and goals.
10 Steps to Start a Franchise
Step 1: Look at the Pros and Cons
Franchising gives you the chance to own a business with a proven system. You get a business model that already works.
However, startup costs can be high. You’ll need enough funds for rent or a building, equipment, inventory, licenses, and staff.
The good news is, you won’t be alone. Most franchisors offer support such as advice, training, and marketing help.
Step 2: Choose the Right Franchise for You
Pick a franchise that fits your personality and goals.
Ask yourself:
- What are my strengths and weaknesses as a business owner?
- Which industries interest me the most?
- What are my long-term goals, and how can franchising help me reach them?
Step 3: Set Up a Legal Business Structure
It’s smart to form a legal entity, such as an LLC or corporation, before you launch. This gives you legal protection and possible tax benefits.
Also, franchisors prefer working with legally established businesses. It gives your business more credibility and shows that you’re serious.
Step 4: Research the Market and Franchise Options
Learn about your local market. What kinds of businesses are likely to succeed in your area? Use government websites like the U.S. Census Bureau and the Small Business Administration (SBA). You can also get help from local colleges or business centers.
Next, start looking at the many franchises available. Check out the International Franchise Association or Entrepreneur.com’s Franchise 500 list. If you want expert help, consider working with a franchise consultant.
When you find some franchises you like, reach out to them and ask for their Franchise Disclosure Document (FDD). This required document gives you important information about the franchise, including contact info for current and former franchisees.
Make sure to speak with both current and former franchisees. Ask them:
- How much experience does the franchisor have?
- What are the startup and ongoing costs?
- How long does it take to become profitable?
- What support does the franchisor give?
- How much control do they keep over the franchise?
Step 5: Write a Business Plan
Once you choose a franchise, create a business plan. This plan helps organize your goals and is important if you need to find investors or lenders.
Step 6: Secure Funding
You’ll need money to pay the franchise fee and other startup costs, plus enough working capital to keep things running in the early days. Possible sources include:
- Your franchisor (check Item 10 in the FDD)
- Friends or family
- Banks or credit unions
- SBA-backed loans, if you qualify
Step 7: Review and Sign the Franchise Agreement
Before signing, have a lawyer go over the franchise agreement. This contract explains your rights and responsibilities, so it’s important to fully understand what you’re agreeing to.
Step 8: Meet Legal and Compliance Requirements
Your city or state will likely require licenses and permits—such as business licenses, health permits, or tax registrations. Not having the right paperwork can lead to fines or losing your franchise.
If you set up a corporation or LLC, you also need to file annual reports. Missing these could result in your business being dissolved. Tools like incorporate.com can help you stay on top of these requirements.
Step 9: Get Your Location Ready, Attend Training, and Hire Staff
Most franchisees are responsible for building or updating their location. The franchisor will give you designs and signs, but you’ll need to hire a contractor to do the work.
At the same time, begin hiring your staff. Your franchisor will provide training for both you and your team before opening day. This helps everyone get familiar with how the business runs.
Step 10: Open Your Doors
Now it’s time to launch. One of the benefits of franchising is that your franchisor will guide you through your grand opening. They may also help with advertising to attract customers.
Extra Tip: Invite your local Chamber of Commerce and business groups to your opening. This can help build local connections and bring in more people.
Are You Ready to Start Your Franchise Journey?
Like many others, you may dream of owning a business. Franchising has helped many people make that dream come true by giving them a proven system and strong brand support. By following the 10 steps above, you can begin your journey with confidence and a clear plan.
