Franchise businesses offer many advantages over starting an independent business or working for someone else.
Established brand and reputation
You can leverage an established brand name and reputation that customers already know and trust. This can give you a competitive edge over other businesses in your market and help you attract more customers. A popular brand comes with a built-in customer base that you can serve without needing to do too much additional marketing to find them.
Proven business model
You can rely on a proven business model tested and refined by the franchisor over time. Franchisors provide operational procedures, training programs, marketing strategies, and other tools that can help you run your business efficiently and effectively. You can reduce your risk of failure by following their best practices.
Support and training
Franchisees often receive extensive training and ongoing support from the franchisor, which can include help with site selection, startup assistance, operations management, marketing campaigns, quality control, and more. This can be especially helpful if you are new to the industry or to owning a business.
Collective purchasing power
Franchisees can also benefit from the collective purchasing power of the franchise network. By being part of a larger group, you can access lower costs for inventory, supplies, equipment, and other necessary items for your business. This can help you save money and increase your profit margin.
Lenders are more willing to finance franchises.
Franchises are also more likely to get financing from lenders than new, independent businesses. This is because lenders consider franchises to be less risky and more stable than other types of businesses. They also look favorably on the franchisor's track record, brand recognition, and support system.
How to start a franchise
Many franchise businesses will have documentation on how to start a franchise with their brand, but most franchises follow similar steps.
Identify your interests and goals
Identify your business interests, experience, and the lifestyle you envision. You need to consider what type of industry, product, or service you are passionate about and what skills and qualifications you have. You also need to think about your long-term goals and how much time, money, and effort you are willing to invest in your business.
Conduct thorough research
You can use various sources of information, such as online directories, trade shows, magazines, websites, and referrals. Compare different franchisors based on their reputation, performance, costs, support, and availability in your area. Don’t assume a popular brand will automatically work based on the brand name alone. Always do your research.
Perform detailed due diligence
Perform detailed due diligence on the franchisors you are interested in. This means investigating their history, profitability, legal issues, customer satisfaction, and franchisee relations. If possible, try to reach out to current and former franchisees to get their honest feedback and insights on their experience.
Examine the franchise disclosure document (FDD)
The FDD is a legal document that franchisors must provide to prospective franchisees before signing any franchise agreement. It details the franchise's legal, financial, and organizational history and structure. It also includes information on the franchisor's obligations, franchise fees, training, support, territorial rights, renewal, termination, and dispute resolution policies. Review the FDD carefully and consult with a lawyer or a franchise consultant if you have any questions or concerns.
Create a detailed business plan
A business plan outlines your goals, strategies, and projections for your franchise business. It helps you plan and anticipate any challenges or opportunities that may arise. It also helps you secure financing from lenders or investors who want to see how you intend to run your business and make it profitable. The more detailed your business plan, the better.
Assess your finances
Before you commit to any franchise opportunity, you need to assess your finances and make sure you have enough funds to cover all the costs involved:
- The initial franchise fee for the right to use the franchisor’s brand and system.
- The build-out costs for setting up your physical location according to the franchisor's specifications.
- The inventory and equipment costs for purchasing or leasing the necessary inventory and equipment for your business.
- The working capital needed to cover your operating expenses until your business becomes profitable.
- The ongoing fees you pay to the franchisor on a regular or periodic basis for their ongoing support and services.
Have a realistic estimate of how much money you need to start and run your franchise business, and how long it will take for you to break even and make a profit.
Choose a suitable location
Choosing a suitable franchise location for your franchise business is crucial for its success. You need to consider factors such as:
- Accessibility and convenience
- Zoning and legal regulations
- Costs and terms
Consult with your franchisor and follow their guidelines and recommendations for choosing a location.
Legal considerations and contracts
Before you sign any contract or franchise agreement with your franchisor, you need to understand the legal implications and obligations involved. Consult with a lawyer or a franchise consultant who can review the contract and explain the terms and conditions to you.
The most important contract you will sign is the franchise agreement, which outlines the terms of your franchise ownership. Those terms will include your rights and responsibilities, the terms of the agreement, the territorial rights, the fees and royalties, the training and support, the quality standards, the renewal and termination policies, and the dispute resolution procedures.
Take part in training
One of the benefits of owning a franchise is that you can take advantage of the training programs offered by your franchisor. Training will help you learn:
- The history and culture of the franchise brand
- The products or services offered by the franchise
- The operational procedures and systems of the franchise
- The managerial practices and skills of the franchise
- The marketing strategies and tools of the franchise
- The customer service standards and techniques of the franchise
- The legal and financial aspects of the franchise
Attend all the training sessions required by your franchisor and complete any assignments or tests that they give you.
Additionally, you can and should keep up with your own business education and take advantage of opportunities to do so, such as making use of free online courses for small business owners.
Hire your staff
You may need to hire staff to help you run your business. Look for qualified, reliable, and motivated people who share your vision and values. Follow your franchisor's guidelines and policies for hiring, training, managing, and retaining your staff.
Launch your business
Once you're a franchise owner, plan a grand opening event to announce your presence in your market and attract customers. Implement a marketing plan to promote your business and generate awareness. Monitor your business performance closely and track your sales, expenses, profits, customer satisfaction, etc.
Make sure to ask your customers what they think. You can use marketing tools or something like custom signup forms to allow customers to engage with you.
Communicate regularly with your franchisor
Communicate regularly with your franchisor. Your franchisor is your partner in business and they want you to succeed as much as you do. They can provide you with valuable guidance, resources, feedback, and assistance throughout your franchise journey. Also, respect and follow their rules and standards and report any issues or concerns that you have.
Start your own business today
By choosing a franchise that suits your interests and goals, you can enjoy the benefits of an established brand, a proven business model, and a supportive franchisor. You can also avoid some of the pitfalls and challenges of starting an independent business, especially if you’re still trying to figure out how to start a business.
Do your research, plan your finances, follow the legal procedures, and work hard to run your business. Beyond these things, it helps to have a good set of marketing tools to start a franchise and maintain it, especially a customer relationship management software. Try Mailchimp's CRM today.