Franchising is a way to start a business using an established brand and a proven system. While you may have less independence than starting from scratch, you benefit from a successful business model, training, and brand recognition.

So, is franchising the right path for you?

Here’s how to choose and start a franchise that matches your interests and goals.

What Is a Franchise?

A franchise is a business owned by an individual (franchisee) but branded and overseen by a larger company (franchisor). Popular examples include Subway, 7-Eleven, and Hilton Hotels.

When you buy a franchise, you gain the right to use the company’s business model, pricing structure, products, and marketing strategies. You also receive access to trademarked materials such as logos and slogans, which help establish your business identity.

Steps to Start a Franchise

Even though franchising allows you to skip business idea development and brand building, there are still important steps you must follow.

1. Determine Your Budget

All franchises require an upfront franchise fee, and many have specific financial requirements for franchisees. Some franchisors require you to have a minimum net worth or a certain amount of liquid assets.

Review your finances to find franchises that fit your budget. Decide how you’ll fund your investment—whether through savings, bank loans, or financing options offered by the franchisor.

2. Research Franchise Options

Before committing to a franchise, review its requirements carefully. You don’t want to invest time and money only to realize it’s not a good fit.

For example, a Cafe Yumm franchise requires a net worth of $500,000. If that doesn’t match your financial situation, you’ll need to look elsewhere.

If possible, speak with current franchisees to understand their experiences. Ask about the pros and cons, support from the franchisor, and hidden costs.

Also, check if a similar franchise is already in your area. If one exists, the franchisor may not approve another location too close by.

3. Attend a Franchise Interview

Starting a franchise is not just your decision—the franchisor also evaluates you. The interview process varies by franchisor but generally includes a discussion of expectations and responsibilities.

Pay attention to how much support the franchisor offers, including initial training and ongoing assistance.

4. Create a Business Plan

Even though a franchise comes with a proven system, you still need a business plan. It should outline your operational strategy, expected sales, expenses, and staffing needs.

Conduct a market analysis to show how the franchise will perform in your area. Identify your target customers and how they compare to the franchise’s existing customer base.

Most franchisors provide guidance on business planning, so take advantage of their resources.

5. Select a Location

Finding the right location can be challenging since many franchisors have specific requirements for store size, layout, and surroundings.

Evaluate the location based on customer accessibility, foot traffic, and visibility. The franchisor may assist in site selection, but if not, use a business location guide to help make the best decision.

6. Review and Sign the Franchise Agreement and FDD

Before signing any contract, carefully review the Franchise Disclosure Document (FDD). This document contains essential details, including:

• The franchisor’s background, financial condition, and legal history.
• Franchise fees, ongoing costs, and required investments.
• Support and training provided by the franchisor.
• Obligations and restrictions for franchisees.
• Renewal, termination, and transfer policies.
• Contact details for current and former franchisees.

It’s best to review the FDD with a lawyer to ensure you fully understand your rights and obligations.

7. Handle Legal Requirements

Beyond the franchise agreement, there are additional legal steps to take:

• Choose a Business Structure: Some franchisors specify which structure you must use.
• Register for Federal and State Taxes: Apply for tax IDs and comply with tax regulations.
• Obtain Licenses and Permits: Requirements vary by location and industry.
• Get Insurance: Liability, property, and workers’ compensation insurance may be required.

8. Stay Updated on Franchise Policies

Franchisors often provide initial training, but policies and marketing strategies can change over time. Staying informed about updates ensures you comply with brand standards and maximize your franchise’s success.

Types of Franchises

Franchises exist in many industries. Here are some common categories:

• Food and Beverage: Fast-food chains, coffee shops, and full-service restaurants (e.g., McDonald’s, Dunkin’ Donuts, Applebee’s).
• Retail: Stores selling various products, from convenience items to specialty goods (e.g., 7-Eleven, The UPS Store, GNC).
• Services: Businesses offering home maintenance, fitness, education, and automotive care (e.g., Molly Maid, Anytime Fitness, Jiffy Lube).
• B2B (Business-to-Business): Companies providing services to other businesses, such as printing, consulting, and cleaning (e.g., FastSigns, ActionCOACH, Jan-Pro).
• Real Estate: Agencies assisting with buying, selling, or leasing properties (e.g., RE/MAX, Century 21).
• Lodging: Hotels and motels offering accommodations (e.g., Hilton, Marriott, Holiday Inn).
• Personal Care: Salons, spas, and wellness businesses (e.g., Great Clips, Massage Envy).
• Recreation: Fitness centers, entertainment venues, and specialty experiences (e.g., Planet Fitness, Chuck E. Cheese’s).
• Specialty Services: Pet care, disaster restoration, and other niche industries (e.g., Petland, SERVPRO).

How to Choose the Right Franchise

With thousands of franchise options available, narrowing it down can be overwhelming. Here are three steps to help you decide:

1. Identify Your Strengths

Even though you aren’t starting a business from scratch, your skills still play a crucial role. Identify your strengths and past experiences to find a franchise that aligns with them.

If you’re unsure, try a SWOT analysis to evaluate your strengths, weaknesses, opportunities, and potential challenges.

2. Match Your Skills to Franchise Opportunities

Use your strengths as a guide when researching franchises. Remember, franchisors are looking for qualified owners who can successfully run their business.

For example, if you have strong sales skills, a B2B franchise like a commercial cleaning business might be a great fit.

3. Analyze Market Trends

Stay informed about consumer trends and business shifts. Just because a franchise is currently popular doesn’t mean it’s a good long-term investment.

Look at market research to see if the franchise concept is growing or declining. If customers are moving away from established brands, it may not be the best time to invest.

Getting Started with Your Franchise

Starting a business from scratch has its rewards, but franchising lets you build on a tested model with built-in support. Many franchisees find this path a great way to run a successful business.

If you’re considering a franchise, do your homework before making a commitment. With proper planning and execution, your franchise can be a profitable and fulfilling business venture.