10 Steps to Starting a Franchise
- 1. Create a Solid Business Model Ideally, you should have an existing business that you want to scale up. ...
- 2. Do Your Research Consider the industry your franchise will be operating in. ...
- 3. Speak to the Experts ...
- 4. Prioritise Recruitment ...
- 5. Implement Training Standards ...
- 6. Plan to Succeed ...
- 7. Decide on Fees ...
- 8. Protect Your Intellectual Property (IP) ...
Full Answer
How to build a successful franchise business?
Seven Steps To Running A Successful Franchise
- Be Passionate About Your Product Or Service. That may sound like a given, but we've all met plenty of people who are at the top of their game yet ...
- Find Out Whether Your Community Needs This Franchise. We all know that franchising is hard, and it's important to do your due diligence and so on. ...
- Make Sure You Have Plenty Of Capital. ...
- Hire The Right Team. ...
How to create a franchise business plan?
- Business plan preparation
- Determine, evaluate and provide resources
- Site selection and approval
- Site design, signage and zoning approvals
- Site preparation
- Build-out, orders, supervision and control
- Franchisor training
- Employee selection and training
- Initial inventory or start-up package
- Initial marketing
How to successfully franchise your business?
- Present Your Business to Potential Franchisees. After identifying your goals, you may now sell your franchise business model to your prospective franchisees.
- Provide Hands-On Training. If you have a vision for your franchise business, your franchisees must share the same objectives with you.
- Work On the Ground. ...
- Implement The Organizational Culture. ...
What should I consider before buying a franchise?
Ten Things To Consider Before Buying A Franchise
- What's the story on the franchisor's business record and reputation?
- Have you spoken to existing franchisees?
- Have you contacted government consumer protection agencies, Canadian Franchise Association and your local Better Business Bureau?
- Is the franchisor's infrastructure comprehensive and stable?
How do you create a franchise model?
How to Franchise a BusinessMake sure your business is ready to franchise.Protect your business's intellectual property.Prepare a financial disclosure document (FDD)Draft a franchise agreement.Compile an operational manual for franchisees.File or register your FDD.Set a strategy to achieve your sales goals.
What are the 4 types of franchise arrangement?
Below are four types of agreements franchised businesses commonly form.Single-Unit Franchise Agreement. In a single-unit agreement, the arrangement grants the franchisee the right to open and operate a single franchise unit. ... Multi-Unit Franchise Agreement. ... Area Development Franchise Agreement. ... Master Franchise Agreement.
What is a franchise model example?
Examples of product distribution franchises include Coca-Cola, John Deere, and Ford Motor Company. Business Format Franchise – The Business Format Franchise is the most common franchise model.
How do you start a franchise for beginners?
Let's go over each one in a little more detail.Do your research. ... Choose a franchise. ... Attend discovery day. ... Review the franchise agreement. ... Get the funding you need. ... Choose a location. ... Take the provided training. ... Prepare for opening day.
What are the 3 basic types of franchising?
There are three main types of franchise opportunities available, these are: Business format franchises. Product franchises, or Single operator franchises. Manufacturing franchises.
What is the most common type of franchise?
Business Format Franchise Business format franchising is the most popular type of franchise system and the one generally referred to when talking franchising. Businesses from more than 70 industries can be franchised, and the most popular are fast food, retail, restaurant, business services, fitness and other.
What makes a good franchise model?
What makes a good franchise is an agile yet strong and supportive infrastructure. All franchisees need initial training when they start. Even if they have experience, they'll still need to learn the ropes of your operating model. Providing ongoing training ensures standards are maintained and benchmarks are met.
What is the best franchise model?
Most Profitable FranchisesDunkin'7-Eleven.Planet Fitness.JAN-PRO.Taco Bell.Orangetheory Fitness.Great Clips.Mac Tools.More items...•
How does a franchising model work?
In this model, the franchisor allows a third party to do business using their trademarks and business model in exchange for fees and a recurring percentage of sales revenue. Franchisees under this model are run according to the parent company's guidelines and rules.
How 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.
How much money do I need to start 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 a franchise a good investment?
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.
What are the 4 types of franchising and give an explanation about it?
Learn the 4 main types of franchise arrangements: single unit, multi unit, area developer and master franchise. The franchising industry is very versatile, with multiple franchises, industry options and investment ranges. In addition, there is a diversity of types of franchise arrangements available.
What are the type of franchising agreements?
There are 4 basic types of franchise agreements: Single-unit, multi-unit, area development and master franchising. A single-unit franchise is the most common and is simply where a franchisor grants a franchisee rights to open and operate one single franchise unit.
What is involved in a franchise agreement?
A franchise agreement is a contract under which the franchisor grants the franchisee the right to operate a business, or offer, sell, or distribute goods or services identified or associated with the franchisor's trademark.
What is single franchise agreement?
A single-unit franchise is an agreement that allows a franchisee to open and operate just a single location. Single-unit franchises are typically managed and run by the franchisee rather than by hired staff.
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...
What is the biggest challenge of building a franchise?
The biggest challenge of building a franchise is taking the success of the individual business and scaling it to a franchise model. This means it needs to be profitable, needs to service an active market, and needs to include systems that can be easily duplicated.
Why is a strong system important for a franchise?
Just because there is a market for an individual market does not mean that market is large enough to translate to franchise success. Franchise demands must be widespread.
What is IP in franchising?
The IP comprises the brand, business model and systems. This means the following. (1) The brand should be registered as a trade mark since a prospective franchisor should have clear and undisputed rights to license third party franchisees to use the brand name and/or logo that is associated with the business (2) The Systems and business model should be written into a set of manuals (such as a training manual, an operations manual, a systems manual and a policies and procedures manual) which should give a full and detailed account of what a new franchisee is required to do to start and operate their business In creating the manuals, a good starting point is to break the business down into two roles; the franchisor role and the franchisee role. The franchisor role usually comprises (1) finding and recruiting prospective franchisees (including assessing whether they have the appropriate finance and skills to be able to operate a franchised outlet), (2) finding, contracting and managing any suppliers that may be required to deliver services or products to franchisees, (3) assisting the franchisees to set up their business (which may include helping them to find suitable premises and approving the fit out of those premises for launch), (4) training and supporting the franchisees so that they are well placed to start and grow their business and (5) managing and monitoring the franchisees to ensure that they are complying with the terms of any franchise agreement or manuals. The franchisee role is usually focused on the delivery of the products or services to end customers. This will include (1) finding, locating and fitting out of appropriate premises, (2) launching and marketing the business, (3) recruiting and training the staff that are to be employed in delivering the products and services to end customers, (4) the general management of the operations of the business, (5) ensuring that the franchise is being conducted in line with the terms of any franchise agreement and manuals, (6) managing the financials of the business and (7) attending any ongoing training and liaising with the franchisor as may be necessary . It is important that a franchisor ensures that the training and manuals are appropriate to enable a franchisee to implement its role within the business.
How to set up a franchise?
So the starting point for setting up a franchise is to: (1) Establish the intellectual property (IP) that comprise the brand name and systems that are to be licensed (2) Analyse and understand the financials behind the business so that a prospective franchisor can demonstrate the level of returns that can be achieved at the franchisee level
What is franchising proposition?
A key part of the franchise proposition is the underlying premise that it is a tried and testing system and business model. At the heart of this is the idea that, if the franchisee implements the systems and adheres to the manuals, they should be able to operate a profitable business and secure a reasonable return on their investment. It is important, therefore, that before looking to franchise its business a prospective franchisor analyses carefully the returns that are likely to be achieved by a reasonably competent franchisee. In most cases, a prospective franchisor will carry out this financial analysis by operating a pilot operation for a period of time since this will allow them to iron out any potential issues and get a clear understanding of the likely financial returns that may be achieved. Sometimes, the franchisor may look to franchise without strictly operating a pilot but using their current business as the example of a pilot operation. However, this will come at an increased risk since there may well be significant differences between the historical operation of its current business and how a franchised outlet is likely to be operated and be performed. Clearly, the greater level of due diligence that is carried out by a prospective franchisor in establishing their franchise proposition, the more likely that it will become a successful franchisor.
Who is Andrew Pena?
Andrew Pena is a commercial litigator who has worked at well-known City practices. Having acted for major international companies and many recognisable high street brands, he now heads up Cubism Law's franchise law practice.
What is the franchise business model?
The franchisor is the person or company that owns the rights to a brand trademark. The franchisee is the one that pays a fee in order to use the franchisor’s trade name and operating systems. This relationship is built on mutual understanding and support. Take a look:
Who created the franchise business?
The modern business model franchise is supposed to have started with Benjamin Franklin when he made an agreement with Thomas Whitmarsh to provide printing services in Charlestown, South Carolina, in the year 1731.
Why franchising a business?
That is because the franchising system allows you to acquire a ready-made business, with a consolidated brand and know-how already tested. Virtually, you buy a brand and all the processes.
What is a franchise operator?
Operates in accordance with a specified contract; Acts as a branch of the franchise company; Gains access to an established customer base; Benefits from brand recognition; Takes advantage of a ready-made business with all its know-how; Runs the day-to-day business.
How does a business benefit from not having to invest in new outlets or units?
Instead, they distribute their goods or services through licensed sales points, thus increasing their brand presence.
When did franchises start?
The franchise business model is not recent. On the contrary, it dates back to the Middle Age and ancient China, when landowners allowed peasants and serfs to do business on their property – such as hunting or selling products at fairs – as long as they paid a kind of tax or commission on business done in their territories.
Is franchising a partnership?
Not everyone is cut out for franchising. It is indeed a business model based on a kind of partnership. So, both sides need to be comfortable about the franchise business model, regarding the company culture, values, goals, mission, etc. Franchising is like a marriage, they must share mutual ideas over the long term, in order to be profitable and successful.
What Are the Franchise Laws and What Is a Franchise Disclosure Document?
Franchising is regulated and requires compliance with federal and state franchise laws.
Does My FDD Have to Be Registered or Filed?
The answer depends on where you will be offering and selling franchises. At the federal level, the FDD is not registered or filed with a government agency. Although your FDD must comply with federal law and the Federal Franchise Rule, compliance is self-regulating, which means that it’s up to you and your franchise lawyer to make sure that your FDD is properly prepared and issued. At the state level, in the franchise registration states, your FDD must be registered with the designated state regulator before you can offer or sell a franchise in that state. In the franchise filing states, you must make certain filings with the designated state regulator before offering or selling a franchise in those states. In all other states, you may offer and sell franchises as long as your FDD is current and in compliance with federal 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.
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 the most important decision in franchising?
Selecting a franchise consultant is the most important decision in franchising your business. Franchising is only learned through experience and when selecting a franchise consultant you must make sure to select one that has operated his/her own franchise system. Operating a franchise system successfully is the best way to learn about franchising.
What is franchise development?
Working with your franchise consultant, you will develop a plan on how to position your offering so that it is easily expandable. Your consultant will review your business operation and recommend ways for effectively delivering various services (i.e. their weekly inventory) for franchisee’s operations.
How to expand a franchise?
Your best expansion strategy is to begin in your local market first and then to the adjacent city and outwards from there to adjacent states and on and on. You don’t want your new locations to encroach on your existing market, and you definitely don’t want your franchisees encroaching on one another. Look at a map and set up buffer zones between prospective markets. Then consider which neighborhoods you do and don’t want your franchise to be located in. This will ultimately determine how consumers perceive your brand. Setting minimum standards for the quality of shopping centers or strip mall locations is an important barrier to entry.
Is it ill advised to start a franchise?
Many would-be franchise starters are so excited about the opportunity to spread their brand that they rush ahead with anyone who shows interest. This is an ill-advised move. Rather , you need to set clear standards for your prospective franchisees up front, including liquid assets, experience, completion of training programs, etc. It will look far worse for your brand if you have franchises popping up and fizzling out repeatedly than if you take your time and expand slowly.
Who is Hossein Kasmai?
Mr. Hossein Kasmai has an extensive experience in the field of franchising. Mr. Kasmai founded many franchise concepts of his own including Guard-A-Kid. Guard-A-Kid founded in 2005, quickly became the industry leader and a very successful franchise in the field of children and family safety.
Is it exciting to franchise a business?
The launch of the first franchise will provide you with a wealth of knowledge and is very exciting to see your business grow into another location without investing any of your money or time. This is why after it is open and operating smoothly you may be tempted to pick up another right away. Don’t take on too much at once as you will still need to provide adequate support to your first franchise as well as your home location.
How much does it cost to start a franchise?
Franchise costs vary widely depending on the industry and business you choose to invest in, not to mention where you live or plan to do business.
What to do if you don't have a franchise?
If you don’t have the initial investment costs at the ready, you may need to tap into outside financing to launch or run your franchise. Many banks, the SBA and franchise-specific lenders offer financial help for would-be franchisees. Other options include crowdfunding or lenders based entirely online.
How long do you have to get a copy of your FDD before signing a contract?
The franchisor is required to provide you with the FDD at least 14 days before you sign a contract, though it’s a good idea to request a copy earlier in your initial phases of research. You can typically download a PDF of the FDD, though some franchisors might be willing to send you a hard copy. 5.
How to get a copy of a franchise disclosure document?
Reach out to the franchisor for a copy of its franchise disclosure document (FDD), which contains detailed legal information about its franchise group along with financial data like the average gross revenue of its locations.
Why do you need a business plan?
A business plan is necessary if you plan to apply for a loan to help with startup costs. Lenders want to know that you have a viable plan for turning a profit and sustaining your business over the long haul, because it helps them evaluate whether you’ll be able to pay it back.
How long does a franchise contract last?
Franchise contracts come with terms of five to 20 years. At the end of the term, you can often choose whether to renew the contract or discontinue your franchise. At contract signing, you’ll likely need to also pay any upfront fees or initial investment expenses.
Where is the Critter Control franchise located?
Let’s say you want to open a Critter Control franchise in San Jose, California — a city with a population of about 1 million people. At an average $582,828 gross revenue for that market, according to Critter Control, here’s what you could reasonably expect.
What do franchisors need to do to replicate their business?
In order to create this replicable model, Nicol says first-time franchisors also need to heavily document how they’ve successfully established the concept. “Prospective franchisors need to create a system of procedures and operations that somebody else can follow,” he said. “It may not be polished or totally complete, but they need to document how the business started, how it should be run, how it should be staffed and more.”
What do franchisors need to hire?
From there, emerging franchisors need to hire a good, tenured corporate support team to provide ongoing support and training to all new franchisees. If growth stalls after the first few locations, Nicol recommends taking a hard look at the marketing strategy for bringing in new franchise leads.
How long does it take for a franchisor to become royalty?
Nicol agrees being properly capitalized is essential. “Typically, a franchisor does not become royalty sufficient until around 75 to 100 open units ,” said Nicol. “That means it takes quite a bit of capital to create and grow a franchise successfully. Sometimes a franchisor will also hold on to their pilot location for too long. Oftentimes, franchisors will need to sell their pilot location and use those funds to focus on the franchisor side. ”
How does franchising increase revenue?
With the right plan in place, franchising can increase a company’s revenue through franchise fees and royalty payments paid by the franchisee, as well as expand brand recognition as the franchise reaches new markets and customers.
What is a franchise disclosure document?
These documents outline the responsibilities of franchise owners, fees and tax responsibilities, financial performance history, rules pertaining to trademarking and much, much more.
