Many people see starting a franchise as a less risky way of opening a small business. Franchises have been proven to work, they have national marketing campaigns, and if you’ve never owned or run a business before, you’ll be able to seek guidance from the corporation. These are just a few of the many benefits of starting your own franchise.
If you’ve never started a franchise before you may not be sure where to start. That’s why we’ve created this article. It’s designed to help you get through the process of starting a franchise as quickly as possible, while ensuring that you don’t make any mistakes that you may regret later on. Let’s get started.
Step 1 – Figure out What Your Goals Are
Some franchises require that you be involved with the day to day operations. Other franchises have no such requirements. With these franchises, called absentee franchises, you can simply hire a complete staff to run everything for you. You fund the operation, pay someone else to run it, and then collect any profits. These are two radically different styles of business ownership. You should ask yourself, which one is right for me?
You should also ask yourself this questions: what am I passionate about? It’s a bad idea to pick a franchise just because it has a higher profit margin or is easier to manage. Hopefully besides just making money, you actually want to enjoy the process of being a franchise owner. So think long term, what are you going to be happy to be involved with ten years down the line?
Step 2 – Figure out your Budget
Every franchise has different budget requirements. Some franchises offer an initial investment that’s as low as $50,000. On the other hand, more expensive franchises may require an initial investment that’s more than half a million dollar. Figure out your budget and stick to it. It’s important to think ahead. If the franchise doesn’t work, will you be able to handle it financially? Just because a franchise has the potential to offer a nice rate of return doesn’t mean that you should stretch your budget to start it.
Step 3 – Research Your Franchise
Starting your own franchise involves a lot of responsibility. Before you invest in it, you want to make sure that the franchise you open will continue to be supported at a corporate level well into the future. Check to see if your potential franchise has a national marketing campaign, corporate support, and training programs for yourself and other managers. These call all help to ensure that you’re successful when you’re buying a franchise.
Don’t be afraid to talk to franchise owners, and research their experiences. This is a good way to get a first hand account of what it’s actually like to own and operate the franchise. If you hear good things from different owners, go over the franchise agreement with a fine tooth comb. Make sure that you thoroughly understand the contract, and know exactly what you’re agreeing to. You may want to talk to a lawyer to help you with this step.
Also, be sure find out what the royalty fee is for your potential franchise. Typically this is collected weekly, monthly, or quarterly, depending on the corporation. Sometimes this fee is a percentage of your overall sales and other times it’s a flat fee. Established corporations may be safer to open, but their royalty fee tends to be higher. Alternatively, new franchises that are riskier to open tend to offer their franchise owners a lower royalty fee. You can learn more about franchise royalty fees by reading this article from Entrepreneur.com.
Step 4 – Complete the Interview Process
The interview process is a chance for the franchise to find out more about you. They’ll typically perform a background check as part of this process. Don’t worry about this or take it personally. Many franchises have this practice and it’s a routine of ensuring that a potential franchise owner is correct for the corporation.
During the interview you’ll probably be asked questions like: what will you do to run your business efficiently? Where do you see yourself in five years time? Why do you want to be involved with our franchise? You can prepare for the interview by asking existing franchise owners what they were asked during the interview.
Step 5 – Sign the Franchise Agreement
If everything goes smoothly up to this point then it’s time to sign the franchise agreement. This is the final step, and you should only take it if you’re truly committed to the franchise and the responsibility of running it correctly. After you’ve signed the franchise agreement you’ll need to make your investment. This will be the agreed upon amount that you’re going to pay the franchise, pay for the building, and so forth.
In some cases you may be able to convert an existing structure and use it for your new franchise. In other cases you may need to build a brand new structure building from the ground up. This can radically affect the costs involved with starting your own franchise, and it’s something that you should talk about during the interview stage.
If you’ve been looking for information about how to start your own franchise, we hope that you’ve found this guide useful. While starting your own franchise is a long term investment, it doesn’t have to be overly complicated process. Start with looking at your own goals and figuring out what kind of franchise is correct for yourself. Next, figure out your budget. A franchise won’t do you any good if it’s so expensive that you can’t afford it.
Next, investigate your franchise. Ensure that they provide a level of support that will help to make your business successful. After all, you’ll be paying a yearly franchise fee and you should receive an appropriate benefit from this. Finally, you’ll complete the interview process and then sign the franchise agreement. These are the final two steps in starting a franchise. After you’ve signed the agreement, there’s nothing left to do but start construction and hire a staff.