How to Start a Franchise and Succeed!

Have you’ve ever wanted to own your own business, but didn’t want to commit the time and energy to building a brand? If so, then a franchise might be the best way to go.

Franchises are often “plug and play” and buying one comes with an already established brand and customer base. Many business owners prefer to take this route, as it eliminates many of the common steps associated with starting a business.

That said, owning and running a franchise comes with its own unique challenges and costs. Let’s take a closer look at what a franchise is.

What is a franchise business and how does it work?

In a franchise, the franchisee pays a licensing fee to use the franchisor’s business model and trademarks. In some cases, the franchisee purchases all the business supplies directly from the franchisor. Before entering into a franchise agreement, prospective franchisees must review the franchise disclosure document (FDD), which outlines the legal requirements and obligations. The franchisor typically provides training, support, and advertising to the franchisee.

Of course, the relationship between franchisee and franchisor flows both ways. Franchisees need to pay a portion of their profits to the franchisor, in addition to any annual licensing fees, stocking fees, advertising co-ops, etc. What’s more, franchisees are often held to strict brand guidelines by the franchisor and are limited in what they can say in ads, the types of promotions they run, etc. There’s little room for innovation or doing things differently in the franchise model.

What’s more, startup costs for a franchise are often expensive, including the franchise fee, the franchisee will often need to purchase a property, buy supplies, hire employees, and commit to a marketing budget. Franchises typically have a minimum capital requirement for new franchisees, who will need to share their financial information with the franchisor before a license is granted.

When you add it all up, it should be clear that franchises aren’t for everyone. But for those who have the startup capital and the desire to build on an existing brand, franchising might be the perfect type of business.

Starting a franchise? Consider the franchise opportunities first.

If starting a franchise sounds good to you, you should know that there are a wide variety of types of businesses to choose from. Here are some of the more common franchise types you might find. Franchise businesses often have lower failure rates compared to independent startups, making them an attractive option for potential business owners.

Food and drink

You’re most likely familiar with franchises in this category, in the least as a consumer. Think McDonalds, Dunkin Donuts, KFC, and many others.

Business services

This category of franchises includes a wide variety of business types, catering both to other businesses as well as consumers. These include printing and shipping services, business consulting, IT/managed services, staffing, and others. Some more well-known franchises include FastSigns, Sandler (sales training), Spherion Staffing.

Health and Fitness

The franchise model is very popular for gyms and other health-related services. This can include gyms, health-focused retailers, and even in-home healthcare. Think Gold’s Gym, the Vitamin Shoppe, and Pearle Vision.

Retail

It is common for retailers to use the franchise model to help spread their brand presence in key geographic locations. Some more well-known retail franchises include Pet Smart, Ace Hardware, and 7-Eleven convenience stores.

How to start a franchise in 8 steps, including franchise fees

Just like starting a business from scratch, starting a franchise business requires research and careful planning. As a franchisee, you have built-in brand awareness and standard ways of doing things, as well as a pre-existing customer base. Understanding the franchise process is crucial for protecting intellectual property and ensuring compliance with franchisor guidelines.

But that doesn’t mean you simply buy your franchise and open the doors. There are costs and other factors to consider before you get started. Here’s how to start a franchise in just eight steps:

  1. Research franchises: First, think of what type of business you want to own and research franchise companies that offer opportunities in that sector. Focus on franchises that align with your interests and skills.
  2. Understand the financial elements and build a business plan: Develop a budget that includes all the financial elements of starting a franchise, including the franchise fees, minimum liquid capital, franchise royalties, and additional expenses. Then build a business plan, complete with financial projections, that will show how you intend to grow the business and make it profitable.
  3. Sign franchise agreement: Every franchisor has a contract you will need to sign before they give you the keys to the kingdom. Make sure you read through the contract, or have a lawyer read it, to understand what your legal obligations will be—and what the franchisor is legally required to provide you.
  4. Form a business entity: Establish a legal business entity to protect your personal assets from your business liabilities. Be aware that some franchisors require you to incorporate your franchise with a specific business structure.
  5. Secure financing: Determine how you will finance your franchise. This could be through personal savings, loans, or investors.
  6. Choose a location: If your franchise requires a physical location, research and secure a suitable site. Consider important factors such as population density, average household income in the area, and local competitors.
  7. Get trained and hire employees: Most franchisors offer training programs to help you understand their business model and operations. Additionally, you’ll need to integrate into the franchise network, which provides ongoing support and resources.
  8. Launch your franchise: Once everything is in place, you can officially open your franchise for business.

Remember, starting a franchise is a significant commitment, but with careful planning and execution, it can be a rewarding business venture.

What else to think about when buying a franchise agreement

When buying a franchise, it’s important to remember that franchisors typically exert control over franchisees to maintain consistency across the business. Franchisors typically provide detailed guidelines for business operations to ensure consistency and maintain brand standards. This significantly limits a franchisee’s ability to make independent business decisions.

For instance, franchisors often retain the right to approve outlet locations, potentially rejecting a site chosen by the franchisee. They may also impose design or appearance standards to ensure a uniform look across outlets, which could necessitate costly renovations or design changes.

Franchisors may also restrict the goods and services a franchisee can sell, limiting their ability to diversify or adapt their offerings. They may dictate operational methods, such as business hours, signage, uniforms, advertising, and accounting procedures.

In some cases, franchisors may even require franchisees to sell certain goods or services at specific prices or purchase supplies exclusively from approved suppliers. Lastly, franchisors may confine a franchisee’s business to a specific sales territory or location, potentially limiting their market reach and competitive edge.

How Homebase can help your franchise succeed

Although buying a franchise is like buying a premade business, there’s still a lot of work to do! Hiring employees, managing their schedules, paying them, and ensuring compliance are all important aspects of running any business, including franchises. Homebase can help you make the most of your franchise opportunity by streamlining various operational aspects.

But all those complicated aspects of running a business become easy when you’re using Homebase. Homebase streamlines various operational aspects of your business, allowing you to focus on growth and customer satisfaction.

Homebase offers a suite of tools that address some key areas of business management such as employee scheduling and time tracking, payroll, recruiting and onboarding new employees, and team communication. Plus, HR support is just a call away with Homebase, so you can get answers to complex questions whenever you need them.

With our intuitive and easy to use app, along with several key integrations and automations, Homebase makes life easier for franchise owners, as well as employees.

Whether you’re just starting out or looking to update existing processes, Homebase provides a comprehensive solution that can help your franchise thrive. Remember, the key to a successful franchise is not just about working harder, but working smarter. With Homebase, you have a partner that supports you every step of the way as you build your franchise.

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