how to set up franchise

How to Start a Franchise in 10 Steps

• Step 1: Consider the pros and cons of buying a franchise. ...
• Step 2: Choose a franchise that aligns with your business goals. ...
• Step 3: Form an LLC or Corporation. ...
• Step 4: Research Market Conditions and Franchise Opportunities ...
• Step 5: Write a Business Plan ...
• Step 6: Obtain Financing ...
• Step 7: Review and Sign the Franchise Agreement ...
• Step 8: Pay Attention to Business Compliance Requirements ...

Full Answer

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 much does it cost to start a franchise?

• Franchise Fee: This amount can vary, depending on the franchise, but the average amount is typically $20,000 or $50,000, according to the Small Business Administration. This is paid when you...

How to turn a small business into a franchise?

What Steps Do I Need to Take to Franchise My Business?

• Create a Business Plan. The first step to a successful franchise in Australia is a deep understanding of the market. ...
• Pilot the Operation. ...
• Prepare a Franchise Operations Manual. ...
• Create Franchise Agreement. ...
• Training of the Franchisee. ...
• Decide on Investment Costs. ...
• Choose an Ideal Franchisee. ...
• Set Up Management and Support. ...

How do I start a franchise?

• The Franchise Business Model
• Is a Franchise Right for You?
• Finding the Right Opportunity
• Selecting a Franchise
• The Franchise Disclosure Document
• Evaluating Potential Earnings
• Before You Sign the Franchise Agreement

How do you start your own franchise?

Steps to Start a FranchiseStep 1: Research your options. ... Step 2: Select a franchise that aligns with your business goals. ... Step 3: Create an LLC or a corporation. ... Step 4: Arrange financing. ... Step 5: Talk to the franchisors and franchisees. ... Step 6: Talk to members of your community. ... Step 7: Create a business plan.More items...•

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.

How does a franchise owner 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.

Do franchises pay taxes?

Franchise taxes are paid in addition to federal and state income taxes. The amount of franchise tax can differ greatly depending on the tax rules within each state and is not calculated on the organization's profit. Kansas, Missouri, Pennsylvania, and West Virginia all discontinued their corporate franchise taxes.

Do franchise owners have to work?

Owning a franchise unit can be demanding, requiring work of 60 to 70 hours a week, but owners have the satisfaction of knowing that their business's success is a result of their own hard work. Some people look for franchise opportunities that are less demanding and may only require a part-time commitment.

Is franchising a good idea?

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. It may cost less to buy a franchise than start your own business of the same type.

What is the failure rate of a franchise?

Coincidentally when I was with NatWest I managed the survey for the last 22 years. 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.

Is franchising a good investment?

If you are truly an entrepreneur, you should never invest in a franchise. While franchisees own their own businesses, are not employees of the franchisor, are at risk for their capital invested in the business, and manage and operate the business on a day-day-basis, franchisees are not really entrepreneurs.

Do franchise owners make good money?

Franchise Business Review found that the average annual pre-tax income of franchise owners in America is $80,000. Only 7% of franchise owners make more than $250,000 annually, and 51% earn less than $50,000. Legally, franchisors cannot give income amounts or forecasts of future income.

How much does a franchise owner make a year?

According to a survey done by Franchise Business Review involving 28,500 franchise owners, the average pre-tax annual income of franchise owners is about 80,000 dollars.

Is it profitable to own a franchise?

Buying a franchise might seem like easy money, but those royalties and fees will quickly cut into profit margins. The majority of franchise owners earn less than $50,000 per year.

How much do 7-Eleven franchise owners make?

The estimated total pay for a Franchise Owner at 7-Eleven is $140,208 per year.

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...

How to buy a franchise?

Step 1: Consider the pros and cons of buying a franchise. Start a business with a proven track record. Starting a franchise allows you to buy into a business model that has already proven itself in the marketplace. Start-up costs can be expensive. Starting a new business can be an expensive proposition.

What is a franchise agreement?

The franchise agreement is a binding contract between you and your franchisor. As such, you should hire an attorney to review the agreement before you sign it. Make sure you understand the exact terms of the contract, including all your rights and obligations under the agreement.

What is a FDD in franchising?

You should expand your research by contacting the franchisors that peak your interest. Each franchisor will provide you with their Franchise Disclosure Document (FDD). FDDs are required by federal law and contain extensive information about a franchise opportunity.

What type of business do franchisors work with?

Many franchisors prefer to work with a corporation or LLC.

What are some examples of international franchises?

Examples include: Business service providers, such as The UPS Store or Express Employment Professionals. Travel Agents, such as Dream Vacations or Avoya Travel.

What does "franchise" mean?

What Does Franchise Mean? In a franchise, one business (called the franchisee) pays another (the franchisor) to use the franchisor’s business model and trademarks. The franchisor offers various kinds of assistance to the franchisee, such as training, support services, and advertising.

How do franchises differ from other businesses?

Franchises differ not only by industry but also by the specific framework they provide for a new business. Each offers a unique take on how to start and build a successful enterprise. In short, you have options when buying a franchise.

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.

Step 1: Research your options

In a way, this is the most fun part of the franchising process because you’re just looking on the internet, daydreaming about your business and typing in search engines phrases like “how to franchise a business” and “entrepreneur jobs” and seeing what comes up.

Step 2: Select a franchise that aligns with your business goals

As you’re researching your options and you get more serious about owning a franchise, you may want to bring in a professional to help you. There are franchise brokers, franchise coaches and even franchise coaching services, some of which are franchises themselves.

Step 3: Create an LLC or a corporation

Many franchisors prefer to work with a corporation or LLC, so if you’re going to be owning a franchise, you’ll want to do this.

Step 4: Arrange financing

Before you get in too deep, it's worth looking into financing. “When it comes to funding it's always important to get pre-qualified just like buying a home. Most people don't get pre-qualified before they start researching because they're still exploring the idea of franchising,” Rose says.

Step 5: Talk to the franchisors and franchisees

When you're looking into owning a franchise, you might encounter franchisors in a variety of ways: by reaching out directly, through their website, at a franchise convention...

Step 6: Talk to members of your community

If you’re thinking of buying a franchise in which you will have a brick-and-mortar location somewhere in a city or town, you really should think about whether your community needs another pizza delivery service, fitness center or car maintenance garage.

Step 7: Create a business plan

Even if the franchisor’s business model and business plan works, you need your own business plan, too. After all, you’re going to want to hit certain money milestones every year, and you are going to want to have a sense of how much you want your business to grow over the years.

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.

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.

What are some online lenders?

Other options include crowdfunding or lenders based entirely online. Online lenders like Kiva and BlueVine aren’t part of the traditional financial industry populated by banks and credit unions. These digital lenders tend to leverage technology for more streamlined or automated approval processes. You could also use an online business marketplace like Lendio or Fundera to compare a network of funding options in one spot.

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.

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.

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.

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.