How to Start a Franchise: Step-by-Step Guide for Entrepreneurs

Franchising isn’t just a business model—it’s an economic powerhouse, generating approximately $890 billion annually. Whether you want to expand your business or invest in a proven brand, franchising is a chance to grow with less risk than starting a business from scratch. 

This guide will cover every part of the franchise process, from what you need to know about buying a franchise to how to start a franchise of your own. 

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What does franchising a business mean?

Franchising a business is like renting a proven business recipe. Think brand identity, operational methods, and expertise. The franchisor (original business owner) shares this winning formula with franchisees, who pay a fee for the right to use it. 

In other words, franchisees get a ready-made business to run, while the original owner can expand without the additional workload or investment. The result? A win-win for both parties.

How much money do you need to start a franchise?

Whether you're looking to franchise your business or buy an existing one, understanding the costs is essential. Let’s break it down.

For franchisors

Starting a franchise costs anywhere from $15,000 to $100,000. The bulk of these costs will go to legal fees, franchise documentation, and compliance. But you should also have enough capital to invest in training materials and marketing to attract franchisees.

For franchisees

For those looking to open a franchise store as a franchisee, things will look a bit different. The cost of starting a franchise varies significantly depending on the brand and industry. For example, opening a McDonald’s franchise requires a $1.47-$2.64 million investment, while a window cleaning franchise may only cost between $25,000-$50,000.

Wondering where all that money goes? Here’s a general breakdown:

• Franchise fee: A one-time payment to operate under an established brand, ranging from a few thousand to several hundred thousand dollars.
• Initial investment: Includes equipment, inventory, and setup costs, which vary by franchise type.
• Royalty fees: Ongoing payments (typically a percentage of revenue) for continued brand support.
• Marketing fees: Contributions to a national advertising fund to promote the brand.
• Working capital: Cash reserves to keep the business running until it becomes profitable. Many franchisors offer financing options or have relationships with lenders to help franchisees secure the necessary funds.

Having a solid understanding of your personal finances and these franchise costs sets you up for success, helping you budget, secure funding, and grow your business.

Types of franchises

Franchising a business can take many different forms, each offering unique opportunities and levels of involvement. Here’s a quick look at the main franchise models and what they mean.

Single-unit franchise

A single-unit franchise means you own and operate one location. It’s a simple, focused model, making them a great option for beginners who want to gain experience before expanding.

Multi-unit franchise

If you’re looking to scale up, a multi-unit franchise lets you own and run multiple locations within a set area. This model works well for experienced operators who have the resources to grow fast and efficiently.

Area development franchise

An area development franchise gives you exclusive rights to a region. Unlike a multi-unit franchise, where growth is flexible, this model requires a bigger upfront investment and a set timeline for expansion. The trade-off? Guaranteed territory and a clear path to growth.

Master franchise

A master franchise takes things further. Instead of just running locations, you can sell franchises in a large area, sometimes an entire country. This puts you in charge of supporting and managing other franchisees. It’s a massive commitment, but for the right entrepreneur, it can be highly rewarding.

How to start a franchise

Here’s what you need to know to start your own franchise the right way.

Assess franchise potential.

Before moving forward, ask yourself these key questions to make sure your business is franchise-ready:

• Can your business model be easily replicated?
• Is there enough market demand for more locations?
• Do you have the systems in place to support franchisees?
• Can you maintain quality and consistency across multiple locations?
• Are you financially prepared for the costs of franchising?

Answered “yes” to most of these questions? You might be ready to start franchising!

Create a franchise model.

Handing over your logo and operational tips won’t be enough to maintain brand consistency across locations. To keep things running smoothly, create a detailed franchise model that includes:

• Operational guidelines: Standard processes for daily tasks like inventory management, customer service, and staffing. Think: how should employees greet customers, restock shelves, and handle returns.
• Training programs: Hands-on resources to help franchisees and their teams succeed. This could include onboarding manuals, video tutorials, or in-person workshops.
• Marketing strategies: A clear plan for attracting and keeping customers. This might cover social media templates, local advertising guidelines, or promotional campaigns.

Remember, the goal is to build a system that gives franchisees a clear, proven process to follow—so they’re not left figuring things out on their own

Prepare legal documentation.

Franchising requires a lot of paperwork, but it’s for a good reason. These legal documents protect both parties. To get everything in place, work with a franchise attorney to draft:

• Franchise disclosure document (FDD): This lays out the key details for potential franchisees like fees, expectations, and how the business runs. While FDDs aren’t registered at the federal level, some states require filing. So, be sure to check local rules before moving forward.
• Franchise agreement: The contract that spells out your relationship with franchisees, covering rights, responsibilities, and what’s expected on both sides.
• Trademark protections: Legal coverage for your brand name, logo, and other assets, so everything stays consistent and protected.

Recruit franchisees.

The right franchisees can make or break your business. Look for people who:

• Fit your brand: They share your values and believe in your mission.
• Have the right skills and finances: Business experience, leadership skills, and financial stability are key. They should be able to manage operations, lead a team, and afford the investment.
• Are in it for the long haul: Commitment matters just as much as experience. You want franchisees who see this as a long-term opportunity, not just a short-term venture.

Provide training and support.

Helping franchisees succeed doesn’t stop after training. A strong franchise support system includes:

• A solid onboarding process: Get new franchisees up to speed with hands-on guidance, step-by-step resources, and mentorship.
• Ongoing training and updates: Keep franchisees informed on best practices, industry trends, and any changes to operations.
• Day-to-day operational support: Be there to help with challenges, answer questions, and ensure brand standards stay strong.

Pros and cons of starting a franchise 

Franchising can be a smart move for both business owners and investors, but it’s not without challenges. Whether you're looking to franchise your business or buy into one, here’s what to keep in mind.

Pros of franchising

• Built-in brand recognition: Franchisees start with an established reputation, making it easier to attract customers. For franchisors, expansion comes with less risk since brand trust is already in place.
• A proven business model: Franchisees follow a tested system, reducing the chance of failure. At the same time, franchisors benefit from a scalable structure that supports growth.
• Training and support: Franchisees get step-by-step guidance, while franchisors ensure consistency across locations.
• Easier access to financing: Banks and lenders often favor franchises due to their history of success, making it simpler for franchisees to secure funding.

Cons of franchising

• High initial costs: Franchisees must cover upfront fees, equipment, and setup costs, while franchisors need to invest in legal, branding, and training programs.
• Ongoing fees: Royalties and marketing fees can add up, so it's important for both parties to agree on a structure that ensures fairness and long-term success for everyone.
• Less creative control: Franchisees must follow strict brand guidelines, which can limit their ability to make independent business decisions or adapt to local markets.
• Market saturation risk: Expanding too fast or placing too many locations in the same area can lead to franchisees competing against each other and impact profitability.

Strategies for successful franchising

Franchising goes beyond expanding to multiple locations—it’s about creating a thriving, sustainable business. Here are key strategies to set you up for long-term success.

Maintain brand consistency.

Franchises are built on consistency. Your customers should have the same experience whether they step into a franchise in Orlando or Chicago. Since you can't manage each location personally, regular audits, feedback sessions, and ongoing training are key to ensuring your franchisees follow standardized processes.

Leverage technology for efficiency.

With countless moving parts, the right technology can make running a franchise much simpler. Platforms like Homebase standardize scheduling, payroll, and compliance across locations. 

This helps keep things consistent and frees up franchisors and franchisees to focus on growing their business rather than managing day-to-day admin.

Build strong franchisee relationships.

You can’t have a successful franchise network without solid franchisee support. Open communication, trust, and regular check-ins create a positive, productive relationship. Using Homebase's team communication tools, franchisors can keep franchisees informed, address concerns quickly, and reduce misunderstandings.

Conduct market research.

Building a successful franchise is a lot like starting any small business—it all begins with thorough market research. Understanding market demand, competition, and industry trends is essential for franchise growth, whether you're just getting started or expanding into new markets. 

But research isn’t a one-time task. Ongoing analysis allows you to make smarter, data-driven decisions and fine-tune your strategy to stay ahead of the competition.

Adapt and innovate.

Getting your franchise up and running might be the most labor-intensive step, but your journey doesn’t end there. Local economies and markets are always shifting, and the most successful brands know how to adapt. 

Staying open to innovation and franchisee feedback will help you stay relevant, attract new franchisees, and drive long-term success.

Is franchising right for your business?

Now that you have a better understanding of how to franchise your business, the question becomes, should you? Here’s how to determine if franchising is the right move for your business.

Key indicators

Not every business is built for franchising. To see if yours is, look for these key signs:

• A proven business model with consistent success.
• A strong brand identity that customers recognize and trust.
• Well-documented operational processes that can be easily replicated.

Bottom line: If your business is thriving and can be duplicated successfully, that’s a good starting point. 

Self-assessment checklist
Franchising is a personal journey too. To see if you’re ready for it, start by asking yourself the following questions: 

• Do you have the financial resources to invest in franchise development?
• Can you provide training and ongoing support to franchisees?
• Are you prepared to give up some control in exchange for growth?

Taking the time to ask these questions will help you make sure you’re ready to grow your business the right way.

Evaluating market demand

Now that you've evaluated your business and your readiness for franchising, it's time to look at the bigger picture: the market. Franchising only works if there’s demand for your business beyond your current location. To figure out if your franchise could really thrive, take the time to dig into different regions and get a feel for:

• Customer interest in your product or service.
• Competitive landscape and potential saturation.
• Expansion opportunities where your franchise could thrive.
  

Franchising can be a great way to scale, but it’s not for everyone. Understanding your business, yourself and the market will give you the clarity you need to decide if franchising is the right move for you.

How Homebase can help your franchise succeed

Owning a franchise comes with a proven business model, but running daily operations still requires managing employees, schedules, payroll, and compliance. That’s where Homebase steps in to make your life easier.

Our all-in-one platform takes the hassle out of day-to-day franchise management by simplifying:

• Employee scheduling and time tracking: Quickly create, adjust, and automate schedules across locations, while tracking hours in real-time.
• Payroll: Automate payroll for all franchise locations and ensure tax calculations are accurate and timely.
• Hiring and onboarding: Post job listings, track applicants, and streamline onboarding for new employees. Making it easy to hire for multiple locations.
• Team communication: Keep dispersed teams connected with real-time messaging, shift updates, and announcements.
• HR and compliance support: Access expert HR guidance and stay compliant with labor laws and regulations.

With our intuitive mobile app, built-in automation, and smooth integrations, Homebase takes the complexity out of managing your franchise—so you can focus on expanding your locations and supporting your franchisees.

Ready to simplify franchise management? Get started with Homebase today!

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Frequently asked questions

What is required to start a franchise?

To franchise your business, you need a proven model that’s easy to replicate. It’s about building something that others can follow, not just having a successful business. You’ll also need clear systems for training, marketing, and operations. 

On top of that, there’s the legal side, like preparing the Franchise Disclosure Document (FDD) and agreements. It’s a lot of work, but once everything’s set, you’ll be ready to scale!

How profitable is owning a franchise?

Franchising can be a profitable venture for both you and your franchisees, but like any business, success depends on the market and how well it’s executed. 

Done right, franchising lets you grow without carrying all the load yourself. Franchisees tap into your brand recognition, while you enjoy a steady stream of royalties. 

How do you open a franchise?

Figuring out how to open a franchise can feel overwhelming, but it doesn’t have to be. Start by finding the right franchise that aligns with your goals. Once you’re set on a brand, securing financing is your next move—whether that’s through loans, savings, or investors. 

From there, it’s about reviewing the Franchise Disclosure Document (FDD), signing the agreements, and diving into the training. With the right brand and a solid plan, you’ll be up and running in no time, supported every step of the way.

How to start your own franchise?

Now, if you’re wondering how to franchise a business you already own, that's a different story. Creating a franchise starts with getting your business ready for expansion. Your model needs to be solid and scalable, so it can be replicated. 

Once your systems are in place, it’s time to find the right franchisees. You’ll walk them through your processes and brand guidelines, helping them get set up and start running their business. Don't forget the legal side—you’ll need to prepare a Franchise Disclosure Document (FDD) and agreements to ensure everything’s in place. 

After that, it’s all about providing ongoing support to keep everything on track and running smoothly.

Tips for starting a franchise business.

Our top franchise advise? Make sure your business is ready for growth. If your operations run smoothly and are easy to replicate, you’re already on the right path. Set up clear systems and processes, from training to ongoing support. And remember, a strong support system for your franchisees is key to their success—and yours.