A franchise can provide an opportunity to start your own business without having to build one from the ground up. There are four key factors to consider when opening a franchise.
Franchising appeals to entrepreneurs who want to start a business using a proven model, rather than creating one from scratch. However, opinions on franchising vary. “Some people think it’s a bad idea, while others love it,” says franchise consultant Teri Villanueva. Teri helps clients find the right franchise by asking, “What do you want the business to accomplish for you?”
The International Franchise Association (IFA) lists over 300 franchise types across industries like roofing and dog grooming. Some franchises require a physical location and a large upfront investment, while others can operate from a home office or vehicle. Choosing the right one depends on your goals and resources.
What is a Franchise?
A franchise allows you, the franchisee, to operate a business using the established brand and business model of a larger company, the franchisor. Franchisors expand by allowing independent operators to run their own locations, while franchisees gain the benefit of operating under a known brand with a proven system.
“It’s essentially a license to use the brand, systems, and name of the franchise in exchange for an initial franchise fee and ongoing royalties,” Teri explains. “But those royalties come with lots of support and training.”
Benefits of Owning a Franchise
1. Operating Under a Well-Known Brand
One of the main benefits of franchising is brand recognition. It can take decades to build a strong brand like Taco Bell or H&R Block, but as a franchisee, you can benefit from their established customer base—though you’ll need to cover franchise fees.
2. Access to a Proven Business Model
Joining a franchise means you don’t need to develop a business model from scratch. You’ll follow the franchisor’s tested operational system. “People who stick to the system usually see good results,” Teri notes. However, some may find the structure too restrictive.
3. Training and Resources
Franchisors provide training to ensure consistency across locations, which is especially helpful if you are new to the industry or business ownership. “People often think they need prior experience in the field, but the franchisor will teach you everything,” says Teri.
4. A Sense of Community
Starting a business can be isolating, but as a franchisee, you become part of a larger network of franchise owners who are often willing to offer advice and support. “You can relate to others and learn from their experiences,” says Teri.
Factors to Consider When Choosing a Franchise
When evaluating franchise opportunities, you should consider:
1. Industry Growth
The IFA releases annual reports with predictions for franchise growth across different industries. In 2024, personal services like beauty and pet care are expected to grow due to increased demand following COVID-19.
2. Budget
Most franchises have specific financial requirements. For example, a McDonald’s requires a $500,000 investment. If you’re opening a smaller or home-based franchise, you could start with $100,000 to $150,000.
3. Franchisor Financials
Reviewing the franchisor’s financial performance, as detailed in the Franchise Disclosure Document (FDD), can help you estimate profitability. The FDD includes financial performance data, but always verify information by talking to existing franchisees.
4. Other Franchisees’ Experiences
Speaking with current franchisees can provide valuable insight into potential earnings and business challenges. “Ask how many customers it takes to break even,” Teri advises.
8 Franchise Business Opportunities
1. Senior Care
With an aging population, senior care services like Visiting Angels and Home Instead are in demand. These franchises have relatively low start-up costs, with investments ranging from $125,000 to $300,000.
2. Day Care
Child care services like The Learning Experience are expected to grow. Opening a franchise requires a net worth of $350,000 and up to $5 million in total investments, depending on the location.
3. Child Education and Enrichment Programs
Some services, like British Swim School, operate without needing a physical location, making start-up costs more affordable—around $110,000.
4. Beauty Services
Specialty beauty franchises like European Wax Center and Deka Lash are growing. Start-up costs range from $200,000 to $550,000, with strong demand in beauty services like waxing and lash extensions.
5. Pet Services
The pet industry continues to grow, with options like dog training, grooming, and retail stores such as Pet Supplies Plus. Franchise costs range from $150,000 to $600,000.
6. Quick-Service Restaurants
Fast food franchises like Kona Ice offer lower-cost alternatives to full-service restaurants. Expect to invest around $150,000 to $200,000 for a food truck franchise.
7. Second-Hand Retail Stores
Resale stores like Uptown Cheapskate and Plato’s Closet cater to the growing demand for affordable and sustainable shopping. Investments range from $376,000 to $600,000.
8. Home Repair and Renovation
Home services like Mighty Dog Roofing or Budget Blinds offer lower start-up costs than restaurant franchises, typically ranging from $100,000 to $300,000.
In conclusion, there are many franchise opportunities available across different industries. Choosing the right one depends on your budget, goals, and personal interests.
