Starting a new business can be exciting, fun, and sometimes a little overwhelming. Learning how to start a franchise comes with many of the same feelings, but running a franchise has its own process and responsibilities.
Franchising is a good option for people who want to run a business with the support of an existing brand. When you open a franchise, you manage the day-to-day operations, but you use another company’s name, products, and business model. Some of the most well-known franchises include brands like Marriott, Hertz, and Subway.
If you’re thinking about opening a franchise, keep reading.
Why Franchising a Business Might Be a Good Idea
Franchising is a proven way to start a business while benefiting from a brand that already has customers. When you run a franchise, you can create jobs in your area while also building a source of income for yourself and your family.
Pros and Cons of Franchising
Like any business model, franchising has both good and bad points.
Some of the main benefits of franchising include:
- A proven business plan
- An existing customer base
- Support and help from the main company
- A brand that people already know
Some of the downsides are:
- You must follow rules set by the company
- Limited control over choosing vendors
- You have to pay ongoing fees to use the brand
- Starting costs can be high
A 10-Step Guide to Franchising a Business
1. Choose the Right Franchise
You can find franchise opportunities in many industries like food, hospitality, education, and health. If you already have a specific type of business in mind, look at available franchises in that field. Research the companies and choose one that matches your personal values and business goals. Think about your own skills, past work experience, and how much money you can invest. Make a list of your top choices and talk to other franchise owners if possible.
2. Research Your Local Market
Just because a franchise is well-known doesn’t mean it will work in your area. Look into the local market to see if people would be interested in the products or services. Study local income levels, age ranges, household types, and job markets. Also, check out your potential competition to better understand what makes your business stand out.
3. Understand the Costs
Once you’ve chosen the type of franchise you want, take a close look at the start-up costs. These can range from $50,000 to over $1 million depending on the brand. Even if you plan to apply for loans, make sure the overall cost is something you can handle. You may also need to buy your own equipment and supplies. Talk to current franchise owners to learn what they had to pay for when they opened. Be realistic about costs so you don’t stretch yourself too thin from the start.
4. Set Up a Business Entity
Running a franchise means you’ll have different legal and tax responsibilities than if you were just an employee. Setting up a limited liability company (LLC) or another type of business structure can protect your personal assets. You don’t have to wait until you’re officially approved for a franchise to set this up. Choose a business name, file your paperwork, and follow your state’s rules.
5. Create a Business Plan
You will likely need a loan to open your franchise, and a clear business plan can help you get it. A good plan will also be needed by the franchisor to understand your goals. Your plan should include:
- A summary of the business
- A description of the product or service
- Research on the local market
- A plan for how you’ll run the business
- A breakdown of your team
- A marketing plan
- Your expected financial results
Even if your brand is well-known, don’t assume lenders will know the details. Treat your pitch like you are starting a new business.
6. Fill Out the Franchise Application
Franchisors often have a formal application process. You’ll need to share your business plan, financial details, and possibly meet for an interview. It can take some time to hear back since franchisors want to be sure that each new owner will represent their brand well.
7. Find a Location
Once you’re approved, you’ll need to find the right spot for your business. Use the research from your earlier steps to guide your choice. Look for areas that match your target customers and check rental prices. Consider backup locations in case your first choice doesn’t work out.
8. Start Franchise Training
Most franchisors will give you training on how to run the business. This can include lessons on hiring, marketing, operations, and using company tools. Be prepared with questions and take advantage of this support. Learn about how to promote your business locally and ask for help setting up a strong online and social media presence.
9. Hire Employees
Even small franchises need staff to run smoothly. Ask for hiring help from your franchisor, such as job descriptions and pay guidelines. Begin recruiting early by posting on job sites or visiting job fairs. If your franchise needs many employees, you can also reach out to local schools or training programs. Look for people with the right skills and consider hiring some help with management duties too.
10. Open for Business
Once everything is ready, it’s time to open your doors. Use the franchisor’s marketing materials to promote your grand opening. You may want to start with a soft opening to train staff and work out any issues. Collect contact information from visitors and stay in touch through email promotions. Offer a special deal for your opening day to bring in customers and create excitement.
Final Tips to Keep in Mind
Understand Yourself
Franchising may not be right for everyone. If you like clear rules and structure, it could be a great fit. If you prefer full freedom and want to build something totally new, starting your own business might be better.
Choose Something You Enjoy
You’ll do better if you care about the business you’re starting. Pick a franchise that matches your background or interests. When you already know the field, it’s easier to come up with marketing ideas and connect with customers.
Know What You’re Good At
If you don’t like sales, avoid franchises that depend on cold calling or lead generation. If you enjoy working with people, something like a restaurant or a health center might be a better fit.
Talk to Others
If you’re new to owning a business, talk to current franchise owners. Join online groups, go to events, and ask questions. Learning from others will give you a better idea of what to expect and help you avoid mistakes.
Where to Begin
If franchising sounds like the right move for you, start by thinking about your experience and what industries interest you. Then look into available franchises and their requirements. Compare start-up costs and decide what you can afford. When you find one that matches your goals and personality, you’ll be ready to move forward and welcome your first customers.
