how to start a franchise from scratch

Steps in starting a franchise

Full Answer

How to start a franchise in 10 steps?

How to Start a Franchise in 10 Steps. 1 Step 1: Consider the pros and cons of buying a franchise. 2 Step 2: Choose a franchise that aligns with your business goals. 3 Step 3: Form an LLC or Corporation. 4 Step 4: Research Market Conditions and Franchise Opportunities. 5 Step 5: Write a Business Plan. More items

Should I start a corporation or LLC for my franchise business?

Starting a franchise as a properly formed corporation or limited liability company (LLC) offers several legal, tax, and business advantages. Incorporating your business creates a legal barrier between your business liabilities and your personal assets. Corporations and LLCs can qualify for tax breaks that are unavailable to sole proprietors.

Is it hard to open a franchise branch?

Starting a franchise can be a new way to flex your entrepreneurial muscles. It may not be an easy job, but the long-term payoff makes it a great choice. If you have mastered the art of opening a franchise, then opening branches should be a walk in a park. Don’t worry if you don’t have the skillsets for it.

How much does it cost to start your own franchise?

How much does it cost to start your own 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 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...•

Can you franchise a business with no money?

If you don't have the capital to start the franchise on your own, consider bringing on a partner who can finance the project. An investor can be a friend, family member, or even an old work colleague. However, if you choose this route, be aware that you're giving up partial control of the business.

What qualifications do you need to own a franchise?

Some franchise requirements to take into consideration may include:Credit score. Minimum credit scores vary by franchisor, but most consider a grade of 680 or higher as ideal.Net worth. ... Available cash. ... Previous industry experience. ... Management experience. ... Total investment required. ... Ongoing costs. ... Training and support.

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.

What is the most profitable franchise?

Top 14 Most Profitable FranchisesMcDonald's. Units in operation: 39,360. ... Dunkin Donuts. Units in operation: 12,800. ... Taco Bell. Units in operation 12,800. ... Subway Franchise. Offers Financing: Yes. ... Anytime Fitness Franchise. Units in operation: 4,904. ... Sonic. Royalty: 2.5% - 5.0% ... Planet Fitness. Royalty 7.0% ... Orangetheory Fitness.More items...

How do franchises get funding?

Options for funding a franchiseFranchisor financing. ... Commercial bank loans. ... Small Business Association (SBA) loans. ... Alternative lenders. ... Personal assets. ... Rollovers as business startup (ROBS) ... Crowdfunding. ... Friends and family.

Can I get loan for franchise?

Small business loans for a franchise from commercial banks Credit unions and commercial banks too offer franchise business financing. However, the process of documentation may test your patience. Your choice institution will study both your personal and business credit scores.

How do people afford franchises?

I've organized this list by level of risk, from most conservative to riskiest.SBA-Backed Loan. ... Find Partners Or Investors. ... Equipment Loan. ... Franchisor Financing. ... Personal Loan. ... 401(k) Rollover. ... Tap The HELOC.

What are the disadvantages of franchising?

Buying a franchise means entering into a formal agreement with your franchisor. Franchise agreements dictate how you run the business, so there may be little room for creativity. There are usually restrictions on where you operate, the products you sell and the suppliers you use.

What does the owner of a franchise do?

As a franchisee, a business owner is responsible for the following: Paying the franchise fee and paying royalties to the franchise to help run the larger business. Finding, leasing and building out a location for the franchise. (As mentioned previously, most franchises will help extensively with this.)

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.

How does one become a franchise owner?

Here are the five steps to becoming a franchise owner yourself.Do every last bit of your homework. Just because you want to buy into an existing chain doesn't mean you don't have to do a massive amount of research. ... Incorporate or form an LLC. ... Inquire and apply to the franchisor. ... Obtain financing. ... Everything else.

How much money can you make from owning a franchise?

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.

What are the 4 ways to become a franchisee?

4 ways to become a franchiseeFigure out your passion and skill set. Buying a franchise business shouldn't just be about facts and figures. ... Prepare to buy-in. ... Investigate franchise brands. ... Speak to experts and existing franchisees.

Is becoming a franchise worth it?

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 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 start a franchise business

Starting a franchise can take three to four months from your initial research to the final purchase, according to advice from the Small Business Administration (SBA). After you’ve signed the contract, it could take another two to six months until you’re ready to welcome customers.

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 to buy a franchise with no money

If you’re short on cash, you aren’t disqualified from starting a franchise — but you are going to need to explore funding and financing to get from planning to opening day.

10 of the most profitable franchises in the US

The success of your franchise is more than the brand you choose. Like any business, your location, consumer demand, economic climate and employees all contribute to your bottom line.

Buying a franchise vs. starting a business

If business is in your blood, deciding whether to open a franchise or start your own business depends on your experience, marketing skills and the kind of model you’re looking for.

Bottom line

Starting a franchise might be the right choice if you’ve got a solid game plan for raising funds and like the idea of following a tried-and-true business model. But if you’re still on the fence or want to research other options, browse our small business guides to starting, buying or growing a business.

Amy Stoltenberg

Amy Stoltenberg is a staff writer at Finder. She manages Finder's newsletter, which is about all things personal finance, with a sparkling eye toward cryptocurrency and the exciting world of DeFi. When her laptop's closed, you can find her driving around Los Angeles, marveling at the palm trees.

1. Do your research

Before anything else, you must first do some research to fully understand the nature of franchising.

2. Choose a franchise

The next step should be choosing a franchise you think best suits your management style, budget, and personal preferences.

3. Attend discovery day

Next, the franchisor will invite you to discovery day, where you will meet them personally and get to know the corporate mission, vision, and values.

4. Review the franchise agreement

After discovery day, the franchisor will present you with a franchise agreement, which is a formal legal contract between the franchisor and the franchisee that gives you the right to open a franchise.

5. Get the funding you need

Before signing, make sure you have a reliable form of business funding to financially provide for your new business venture.

6. Choose a location

Alright. Now that you have done your research, chosen a franchise, signed all of the appropriate documents and secured the funding you need, it’s time to choose a location for your franchise.

7. Take the provided training

Next, you will need to take the necessary franchise training programs provided by the franchisor.

What Are the Challenges 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.

What Shortcuts Should You Avoid?

The truth is there are no shortcuts when building a franchise model. To build a successful franchise you need to put in the research and the work. You need to make sure your business makes sense as a franchise and then help those who invest in that franchise succeed.

Franchise: The Pros

At its best, franchising provides an opportunity to buy into an existing, successful business model that comes with a proven track record, a successful training program, a solid supply chain, and expert technical support. Some of the best-known franchises have impressive success rates, with the chances of failure hovering in the low single digits.

Franchise: The Cons

Franchising also poses challenges. Purchasing a franchise can be an expensive proposition, with costs often running as high as $500,000 to $1 million. Franchises also come with ongoing expenses that reduce your take-home pay.

Startup: The Pros

If you’ve got an idea, you may be able to turn it into a business. Sam Walton did it with Walmart, Bill Gates did it with Microsoft, John Schnatter did it with Papa John's, and countless other entrepreneurs have done the same.

Startup: The Cons

When you start your own business, you are on your own. Much is unknown – will the product sell? Will customers like it? Will you make enough money to survive? The failure rate is also high. Statistics show that 20% of startup businesses don’t survive the first year; about half make it to year five; and approximately 35% last ten years.

The Bottom Line

People purchase a franchise because the model works. It offers careful entrepreneurs a stable, tested model for running a successful business. It also requires them to operate on someone else’s business model.

3. Decide Which Niche to Concentrate On

Many dating sites allow users to filter their search results based on age, geographic location and education level, but there are very few, if any, dating sites based on these specific criteria. Starting a dating site for specific parts of the country could help people meet who may otherwise miss each other.

4. Know Your Major Competitors in the Industry

There a whole of people who have become successful in the dating site business. These are people who have recorded some huge level of acceptability in the last years or decades. Some of them include;

5. Decide Whether to Buy a Franchise or Start from Scratch

Buying into a franchise is the best way to start up a dating site business. An existing dating site business will have honed its operations over time. This means you should inherit a business with streamlined and documented systems.

9. Discuss with an Agent to Know the Best Insurance Policies for You

Countless numbers of people have found love, friendship, and business contacts through social networking and internet dating sites. However, we also hear of the horror stories involving people that are physically harmed. You, the owners of these very profitable websites, should constantly balance the risk vs. the reward of operating your company.

10. Protect your Intellectual Property With Trademark, Copyrights, Patents

Intellectual property rights are a business asset, and are often the most valuable business asset. Any business presently trading or considering trading on the internet needs to check what intellectual property rights it owns and ensure that it is fully protected.

11. Get the Necessary Legal Documents You Need to Operate

Documents play an essential role in protecting the interests of the business and business owners over the course of a company’s lifetime.

12. Write a Business Plan

The business landscape continues to change very quickly, and that constant change brings about plenty of opportunities for entrepreneurs. Additionally, the tools and cost-benefit involved in building and marketing an Online business have become increasingly easier, cheaper and faster than ever.