how to be a part of a franchise

12 Steps you need to follow to be a Franchisee

• Step 1: Definition of the Investor and Franchise Profile ...
• Step 2: Analyze the Options that Best Fit the Investor’s Profile ...
• Step 3: Initial Introduction / Discovery Calls with the Franchisors ...
• Step 4: Submission of Franchise Application ...
• Step 5: Review of the Franchise Disclosure Document (FDD) ...
• Step 6: Introduction to Current Franchisees ...
• Step 7: Invitation to Discovery Day ...
• Step 8: Decision to Invest ...

Full Answer

What are the steps to buy a franchise?

– A Step-By-Step Guide

1. The Initial Contact. The initial phone conversation is for both parties to get a general feel for one another. ...
2. The First Interview – Getting to Know the Franchisor. The First Interview is similar to the initial call, just much more in-depth. ...
3. Getting Your Finances Together. ...
4. Understanding the Disclosure Document. ...
5. Contacting Current Franchise Owners. ...

More items...

How to make your own franchise in 5 steps?

• Set Realistic Goals. Franchising is more of a marathon than a sprint. ...
• Research Your Competitors. ...
• Develop Your Franchise Offering for Both Individual and Multi-Unit Sales. ...
• Make Sure Your FDD Is Compliant for Every State. ...
• Learn Franchising and Get Involved in the Franchise Community. ...

How to raise money for a franchise?

• Begin at the beginning. Before you choose a franchise to partner with, before you even begin to shop for your ideal franchise, it’s a good idea to determine your current ...
• Try talking to the franchisor before seeking funds elsewhere. ...
• Getting funding is an exercise in risk management and tolerance. ...
• Some food for thought. ...
• You can do this. ...

What are the benefits of owning a franchise?

Perks of owning a franchise

1. Brand name. Franchises are popular in the United States because consumers come back to what they know and love. ...
2. Tried and true system. When you open a franchise, you know you’re benefiting from the business method that skyrocketed the company.
3. Low cost of goods. ...
4. Support team. ...
5. Financing. ...

Do franchise owners get paid?

How do franchise owners get paid? Franchise owners can pay themselves a salary or depending on their business entity, they may be able to take a draw from their accumulated equity.

What does it take to be a franchise owner?

A franchise owner contracts with a company to sell that company's products or services. After paying an initial fee and agreeing to pay the company a certain percentage of revenue, the franchise owner can use the company's name, logo, and guidance.

Can anyone be a franchisee?

It's important to have some type of work background when becoming a franchisee. You should have worked in customer service, management, or any number of careers before you can move forward with your own.

How much money do you need to join a franchise?

Franchise startup costs can be as low as $10,000 or as high as $5 million, with the majority falling somewhere between $100,000 and $300,000. The price all depends on the industry, location and type of franchise.

Is owning a franchise a full time job?

Buying a franchise doesn't have to mean making a full-time commitment. Believe it or not, there are many franchises that can be run on a part-time basis, especially when you first start out.

Do you have to work if you own a franchise?

Nor do you have to do all the work. When it comes to running that shop, you're actually the business owner and can hire people to deliver the service or sell the products; you don't have to do all of that yourself. Sucess is dependent on how well you work on the business, not just in the business.

Is franchising a good idea?

Advantages of buying a franchise You don't necessarily need business experience to run a franchise. Franchisors usually provide the training you need to operate their business model. Franchises have a higher rate of success than start-up businesses. You may find it easier to secure finance for a franchise.

Is it smart to buy a franchise?

If you're a fledgling entrepreneur or a seasoned business person wanting to diversify your holdings, you've probably wondered, “Are franchises a good investment?” The simple answer is yes, especially if a great opportunity presents itself. There is an obvious appeal to starting a business via buying a franchise.

Do you have to be rich to open a franchise?

Initial franchise fees alone may be as low as $10,000 or over $100,000, and together with the costs of opening a business, it could end up costing you hundreds of thousands to millions of dollars to get started. In other words, you may need to have a substantial level of wealth before you can even open a franchise.

How much is Mcdonalds franchise fee?

McDonald's franchisee applicants must have a minimum of $500,000 available in liquid assets and pay a $45,000 franchise fee. Those looking to launch a new McDonald's franchise can expect to shell out between $1,314,500 and $2,306,500. Existing franchise prices can cost upwards of $1 million or more.

What does a KFC franchise cost?

For non-traditional KFC outlets, KFC charges an initial license fee of $22,500. For traditional KFC franchise agreements, the franchise (or initial license) fee is $45,000 split into the deposit fee and the option fee.

What is Starbucks franchise fee?

What are the Financial requirements for a Starbucks licensed store? You need to pay the licensing fee of between $50,000 – $315,000 and you must have over $1,000,000 in liquid assets to be considered for a licensed store by Starbucks.

What education is needed to own a franchise?

There are several education requirements to become a franchise owner. Franchise owners usually study business, accounting or marketing. 62% of franchise owners hold a bachelor's degree and 15% hold a associate degree.

How does owning a franchise work?

A franchise enables you, the investor or franchisee, to operate a business. You pay a franchise fee and you get a format or system developed by the company (franchisor), the right to use the franchisor's name for a specific number of years and assistance.

What is the failure rate of a franchise?

Pretty much every year the survey has been conducted has shown between 8-12% of franchise businesses left their franchise each year. This is for a variety of reasons, including retirement, selling, ill-health and financial failure.

What is a disadvantage of franchising?

Disadvantages to franchisees include high costs and royalty payments, strict product rules, lack of support from uninterested franchisors, lack of flexibility in where to locate and how to trade, and other start-up challenges. Entering into an agreement with an interested franchisor is important.

Do franchise owners make money?

Although franchisors cannot forecast income, as a franchisee, you can definitely make money. It’s important to assess your costs regularly and make...

Are franchise fees paid yearly?

Franchise fees are usually on a monthly basis. The fee is a percentage of your revenue, and the royalties can range from 4% to 12% per year.

How much does the average franchise owner earn per year?

In a study from Franchise Direct, the average franchise owner makes $80,000 a year before tax. However, the range of income is quite large: anywher...

What kinds of franchises are available?

In general, there are three types of franchises available: business, management and product distribution. A business franchise gives you the rights...

Is becoming a franchise owner right for me?

The first step to choosing a career is to make sure you are actually willing to commit to pursuing the career. You don’t want to waste your time doing something you don’t want to do. If you’re new here, you should read about:

How to become a Franchise Owner

It is imperative that one makes sure they have the right traits and characteristics needed for franchising, or failure is almost a given. A Bachelor's Degree in Hospitality Management or Business Management can be an asset.

What is a franchise application?

The application is typically only a few pages containing a number of questions regarding the profile and personal finances of the applicant. The franchisor requests this information to ensure that the potential franchisee meets the minimum requirements for the franchise before they continue with the process. This saves both the potential franchisee and franchisor time by verifying that the requirements are met before moving further in the process.

How does a franchisee work with a broker?

The franchisee will work with the brokers to find potential locations that they will then submit to the franchisor for approval before negotiating and signing the lease. The expertise of the franchisor can prove vital during the lease negotiation to ensure the franchisee obtains a fair lease.

What is the development phase of a franchise?

Franchises offer a wide range of support during the development phase , so it is important for the franchisee to understand how the franchisor will support them during this phase before signing the FDD or any supplemental agreements.

What is the introduction call for a franchise?

The initial introduction call or meeting is an integral part of the process when deciding which franchise investment is the right one. The call typically serves as the first time a potential franchisee speaks directly with someone from the franchise team. The call is basically an interview for both parties. On one hand, the potential franchise investor should be looking to understand the business, what would be required of them to run the business on a day-to-day basis, and the investment requirements to get the business up and running. On the other hand, the franchisor is typically looking to find out whether the franchisee candidate is qualified for their franchise. Here are some key questions the potential franchise investor should consider before the initial call. Additionally, here are the most important questions to keep in mind throughout the discovery process. Each franchisor is different though they will typically try to see if the potential franchisee candidate shares the same characteristics of their most successful franchisee owners. Franchisors are selective as they need to make sure that only well-qualified franchisees enter their franchise system and uphold the brand standards of the franchise. At the end of the day, entering in a franchise agreement needs to make sense for both the franchisee and franchisor as each one is committing to a long-term relationship usually lasting a duration of 10 years.

How long does a franchise agreement last?

At the end of the day, entering in a franchise agreement needs to make sense for both the franchisee and franchisor as each one is committing to a long-term relationship usually lasting a duration of 10 years.

Why invest in a franchise?

A major benefit of investing in a franchise is the chance to speak with current franchisees that have already gone through the same franchise application process and have already opened their own unit. The franchisor will provide the potential franchisee with the contacts to current franchisees so that the investor will have the opportunity to speak with them before deciding to invest in the franchise. During the conversations the potential franchisee will have the chance to ask many questions of the franchisees in order to better understand how it is to be a franchisee in the franchise. The franchisees are usually quite candid in these conversations by letting the potential franchisee know what they like and do not like about the franchise. These conversations are very valuable to the potential franchisee before deciding on the investment as they provide an inside look at the franchise from the prospective of a franchisee currently operating.

What are the factors to consider when investing in franchises?

Important factors to consider are investment level, desired involvement in the business, industries of interest, return on investment goals, and desired territory or area to locate, among others. These factors will help the potential franchise investor narrow down their list of potential options for investment.

What does it mean to franchise a business?

When you franchise your business it means that you have taken the necessary legal and business steps to sell franchises, support franchisees, and grow your brand. First and foremost, your franchise lawyer will have to prepare and issue a Franchise Disclosure Document that complies with federal and state law.

How Long Should It Take to Franchise My Business?

Typically, franchising your business takes from 90 to 120 days. Depending on unique factors related to your business or industry, there could be variations. A lot also depends on who you are working with and your internal team.

What Are the Franchise Laws and What Is a Franchise Disclosure Document?

Franchising is regulated and requires compliance with federal and state franchise laws.

Do I Have to Work with a Franchise Lawyer?

If you are going to franchise the right way, you need to work with a lawyer who specializes in franchising and who is experienced in working with new and emerging franchisors like you.

Can a Franchise Developer or Consultant Prepare My FDD Instead of a Franchise Lawyer?

No. Your FDD is a legal document that requires the integration of federal and state-specific franchise laws and regulations and should only be prepared by a qualified franchise lawyer.

How Do I Get Started?

By reading this guide, you’ve already taken the first step! Now that you have a solid foundation as to what franchising is all about and the steps involved, start building the right team to help support and guide you in franchising your business .

How long do you have to give FDD to franchisees?

It’s required by federal and state law and is the legal foundation for your franchise. You are required to give prospective franchisees your FDD no less than 14 days before signing any agreement with a franchisee or accepting any payments from a franchisee.

What is franchise agreement?

A franchise agreement is the contract between a franchise owner and the parent company. Despite today’s broad range of franchise opportunities, the agreements that define them have certain, typical parts, in common.

What are franchise restrictions?

Any restrictions on how the franchisee can source products and services, or what they are allowed to sell.

What is a financial statement of a franchisor?

Financial statements of the franchisor, copies of any contracts used in the offering and a copy of the franchise agreement itself.

Is a franchise agreement binding?

Before digging into the actual wording, let’s look at the bigger picture. First, it’s key to remember that franchise agreements are binding legal documents. Get the advice of an attorney, preferably one specializing in franchise law. That does not mean you should abdicate your responsibility to know what you are signing. Question anything you are unclear on and anything out of sync with verbal promises or other written documents.

Who should the agreement indicate?

Who: The agreement should indicate the parties to the contract. Cross-referencing the listed information with that provided on the FDD is a perfect illustration of how these two documents work in tandem.

Can a franchisor remake an agreement?

According to The Balance, a franchisor willing to remake an agreement to the franchisee’s specifications might be cause for concern. What you are purchasing, when you buy a franchise, is the ability to take advantage of a known name and a tried-and-true system. A franchisor willing to change things up could be a sign of trouble.

What is a franchise?

A franchise is a business owned by an individual that is a part of a larger brand—that may be national or multinational—which oversees each franchisee location. Many stores that you are familiar with that have multiple locations are franchises. The two levels of people involved in franchises are:

How successful are franchises?

Franchise businesses are highly successful in generating your return on investment. Thanks to the already-established brand and customer loyalty, it will likely not take long for your business to start generating profits.

Why invest in a franchise?

When you invest in a franchise, you gain access to loyal customers and employees who are familiar with the brand. This will reduce your workload and help you focus on building profitability for your business.

What is franchising partner?

The franchisor is your business partner and it is important to make sure that your franchisor leads with vision, integrity and care for those who invest in their franchise system. Take time to get to know your franchisor and most importantly, to understand the terms and conditions of your franchise agreement. A good franchisor should be just as interested in you as you are in them and provide you with as many details as you need.

What is franchising relationship?

This form of franchising is a supplier-dealer relationship. The franchisee typically sells the products of their franchisor but does not use the entire business system to operate. For example, many bottling, automotive, gasoline and manufacturing industries use this franchising relationship.

Do franchises require fixed capital?

Most franchises require a specific amount of fixed capital from franchisee applicants, so make sure you know exactly how much money you have to work with. Identifying your financial capabilities will help you to prioritize franchises that are feasible for you to purchase.

Can a franchisee have multiple opportunities?

Each franchise may not provide multiple opportunities for every prospective franchisee to join. This means that franchisors can be extremely selective so, it is important for you to show that you are a motivated and successful individual who will contribute positively to their overall business model. The best way to increase your chances of being selected is by being prepared for each meeting and thoroughly researching the franchise before you express interest.