Franchising gives people the chance to own a business by using a well-known idea and a trusted brand. While you may not have full control over every detail, you gain the benefit of following a proven system, learning from an experienced franchisor, and avoiding the challenges of starting from nothing.
But is owning a franchise the right way for you to start a business?
Here’s how to find and start a franchise that matches your interests.
What is a franchise?
A franchise is a type of business that is owned by an individual (called a franchisee) but uses the name, products, and support of a larger company (the franchisor). Well-known franchises include Subway, 7-Eleven, and Hilton Hotels.
When you buy a franchise, you get the right to use their business model, pricing system, products, and marketing tools.
You also gain access to the company’s logos, slogans, and other brand materials, which are important for building a business identity.
How to Start a Franchise
Even though you don’t have to come up with a new idea or brand, there are still key steps to follow—some unique to franchising and others similar to starting any business.
1. Know Your Budget
There is always an upfront franchise fee, and franchisors often require you to meet certain financial conditions. For example, some may ask you to have a specific net worth or amount of cash on hand.
Look over your finances to find out which franchise opportunities fit within your budget. Think about how you’ll pay for it—whether with personal savings, loans from a bank, or financing from the franchisor.
2. Do Your Research
Don’t waste time dreaming about a certain franchise only to discover later that you don’t qualify.
For instance, to open a Cafe Yumm franchise, you must have a net worth of $500,000. If your finances don’t meet that, consider other options.
Try to speak with current franchise owners if possible. Ask about their experience, what they like or dislike, and what it’s like working with the brand. Also, ask about any extra costs that may not be obvious at first.
Check if the franchise already has a location in your area. If it does, the franchisor may not approve another one close by.
3. Participate in an Interview
Starting a franchise involves more than just deciding to open a business—you’ll usually go through an interview process like a job application.
The interview may vary depending on the franchisor, but the goal is to make sure the business is a good fit for both sides.
Pay attention to the kind of support the franchisor offers, both during setup and after you’re up and running.
4. Write a Business Plan
Even though a franchise has many things already figured out, you still need a business plan. It should explain how you will run the business, your sales and expense forecasts, and staffing needs.
One key part is the market analysis. You need to show how your local market fits with the franchise. Identify your target customers and how they compare with the franchise’s usual audience.
Many franchisors offer help with this step.
5. Choose a Suitable Franchise Location
Finding the right location can be tricky. Some franchisors have specific rules about how big the space should be, what the layout should look like, and what kind of surroundings the business should have.
You’ll also need to think about how well the spot will perform:
- Will it attract your target customers?
- Is there enough foot traffic?
- Is it easy to get to?
In most cases, the franchisor will help you find a location. If not, look at resources that guide you through choosing a good business site.
6. Sign the Franchise Agreement and Review the FDD
Before you officially commit, you’ll need to review the Franchise Disclosure Document (FDD) and sign a franchise agreement. This contract outlines the rights and responsibilities of both you and the franchisor.
The FDD includes details such as:
- Background of the franchisor: History, experience, and any legal or financial issues.
- Financial records: To show the franchisor’s financial status.
- Costs: Initial fees, training, marketing, and ongoing royalty fees.
- Training and support: What help the franchisor provides.
- Franchisee duties: Expectations on purchases, operations, and marketing.
- Territory rights: Whether you’ll have an exclusive area and what rules apply.
- Trademarks and branding: Use of logos and other branding tools.
- Rules on renewing, ending, or selling your franchise.
- List of franchise owners: Current and former franchisees you can contact.
- Earnings info: If provided, the income performance of other franchise locations.
- Restrictions: Any limits on products or services, suppliers, or where you can operate.
It’s best to review the FDD with a lawyer before signing.
7. Make Your Business Legal
Aside from the franchise agreement and FDD, there are other legal steps to take:
- Business structure: The franchisor may require a certain type of legal setup.
- State and federal registration: You’ll need tax ID numbers and possibly more depending on where you live.
- Licenses and permits: Check which ones are needed at the city, state, or federal level.
- Tax registration: Be sure to register for the right taxes at all levels.
- Insurance: You may need several kinds of insurance—like general liability, property, or workers’ compensation.
8. Stay Updated on Franchisor Policies
Most franchisors provide training that covers business operations, customer service, and more.
But training doesn’t end after you open. Franchisors often change their marketing, products, or systems. Keeping up with these changes helps you stay on track with the brand and run a successful franchise.
Common Types of Franchises
Franchises exist in many industries. Here are the main categories:
- Food and Beverage: Fast food, full-service restaurants, coffee shops, dessert shops.
Examples: McDonald’s, IHOP, Dunkin’, Baskin-Robbins - Retail: Stores that sell goods directly to customers.
Examples: 7-Eleven, The UPS Store, GNC - Services: Offer services like home repair, auto care, or fitness.
Examples: Mr. Handyman, Jiffy Lube, Gold’s Gym, Kumon - Business-to-Business (B2B): Support other businesses through printing, cleaning, or consulting.
Examples: Minuteman Press, Jan-Pro, ActionCOACH - Real Estate: Help people buy, sell, or lease properties.
Examples: RE/MAX, Century 21, Coldwell Banker - Lodging: Hotels or motels for travelers.
Examples: Hilton, Marriott, Holiday Inn - Personal Care: Offer haircuts, massages, or wellness services.
Examples: Great Clips, Massage Envy - Recreation: Entertainment or fitness centers.
Examples: Chuck E. Cheese’s, Club Pilates - Specialty: Serve unique markets like pet care or disaster recovery.
Examples: Petland, SERVPRO
How to Choose the Right Franchise
With over 3,000 franchise options, it’s easy to feel overwhelmed. Here are three tips to help you decide:
1. Know What You’re Good At
Make a list of your skills and interests. Whether you’re good with people, have strong management skills, or already know how franchises work—your background can guide your choice.
If unsure, try a personal SWOT analysis to better understand your strengths and weaknesses.
2. Match Skills to Franchise Options
Look for franchises that fit your strengths. The franchisor wants to know that you can handle their business. Relevant experience or skills will help you stand out.
For example, if you’re good at sales, you might do well in a B2B cleaning franchise.
3. Follow Market Trends
Watch what’s happening in the market. Just because a type of franchise is popular doesn’t mean it’s the right choice. Do some research to see if it has staying power or is just a passing trend.
Use market data to see how customers are spending. If buyers are moving away from big-name brands in a category, that could be a warning sign.
Start Your Franchise
You don’t have to come up with a brand-new idea to run a great business. Many people find success by following the model of a well-known franchise.
If you’re thinking about buying a franchise, take time to learn all you can before making a decision.
With the right plan and effort, running a franchise can be just as satisfying and profitable as starting your own business from scratch.
You can also check out our full guide to starting a business to make sure you’re ready for the journey ahead.
