How to start a franchise business
Look to these dozen steps that can guide you from conception to opening day.
- List your top companies or businesses. When putting together a list of franchises you’d like to own, start by thinking about your favorite businesses.
- Research the franchise market. Turn your eye to the market in your neighborhood or the community you intend to operate in. ...
- Evaluate investment and franchise costs. After you’ve pinpointed a market, research...
Full Answer
What is the first step in starting a franchise?
The first step in starting a franchise business is deciding which business you want to join. Hundreds of companies offer franchise opportunities: which one is right for you? Here are a few questions to ask yourself. Do you want an online or in-person business? What industry are you interested in?
What licenses do you need to open a franchise?
Most state and local governments require you to obtain licenses before launching your franchise — including health permits, occupational licenses, tax registrations and business licenses — or face fees. While most states require the franchisor to apply for business licensing, a handful of states require a franchisee to register:
How long does it take to buy a franchise?
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.
What should I look for when buying a franchise?
Keep in mind markets can vary by location and the franchisor has a vested interest in highlighting their most successful franchisees. Whether you are looking to purchase an online or in-person franchise, make sure there is enough room in the market for additional businesses.
What do I need to open a franchise?
How to buy a franchise, step by stepBe sure about your reasoning. ... Research which franchises you may want to own. ... Begin the application process. ... Set up your “discovery day” meeting. ... Apply for financing. ... Review and return your franchise paperwork very carefully. ... Buy or rent a location. ... Get training and support.
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.
What does one have to do to become a franchise owner?
What does it Take to Become a Franchise Owner?Establish your budget. Determine how much money you are able to pay upfront, and look into funding opportunities as well.Consider your goals. ... Do your research. ... Reach out to the Franchisor. ... Go through the application process. ... Sign the franchise agreement.
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.
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 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.
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.
Is it hard to run a franchise?
Running your own franchise is still hard work, and there are drawbacks to opening a business that requires operating by someone else's rules.
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.
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.
How much do 7-Eleven franchise owners make?
The average salary for a Franchise Owner is $68,300 per year in United States, which is 51% lower than the average 7-Eleven salary of $140,208 per year for this job.
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 much money do I need to start a franchise business?
The cost to start a franchise business varies by business. Some only cost a few hundred dollars, while starting a McDonald's franchise costs betwee...
How much do franchise owners make per year?
It varies by business. The average is usually between $50,000 and $70,000 per year.
Can I start a franchise business for free?
Not entirely, no. The franchisor generally requires an initial payment before you can open your business. If you don't have capital, consider bring...
How do you start a franchise business?
1) Identify a business you want to work with. 2) Research current owners and the competition. 3) Determine market interest. 4) Research startup cos...
What is the most profitable franchise?
According to Entrepreneur, the most profitable franchises are Taco Bell, Dunkin', and The UPS Store.
How do you start a franchise business?
1) Identify a business you want to work with. 2) Research current owners and the competition. 3) Determine market interest. 4) Research startup costs 5) Create a business plan. 6) Form an LLC or corporation. 7) Choose a location. 8) Create a marketing plan.
How much money do I need to start a franchise business?
Some only cost a few hundred dollars, while starting a McDonald’s franchise costs between $1 and $2 million.
How much do franchise owners make per year?
It varies by business. The average is usually between $50,000 and $70,000 per year.
What is the most profitable franchise?
According to Entrepreneur, the most profitable franchises are Taco Bell, Dunkin’, and The UPS Store.
How much does it cost to start a franchise?
The cost to start a franchise business can range drastically from a few hundred bucks to set up a website to millions to pay franchise fees and build a store . Usually, franchisors will list the average cost on their website.
Why is franchise business so popular?
A franchise business is a popular business model because it offers owners the best of both worlds: the support of a large brand and the benefits of owning a business.
What happens when you buy into a franchise?
Franchise businesses often have a lower failure rate. When you buy into a franchise, you join a proven business model that works. You also have additional support and business resources that can make a difference in your success.
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.
Why is my business being audited?
There’s also a higher chance than usual that your business will be audited, because the IRS views ROBS as a tax strategy — basically, a way to avoid paying taxes.
What Is a Franchise?
Put simply, a franchise is a business that’s owned and run by a franchisee or individual but is overseen and branded by a larger parent company or franchisor. Common examples include restaurants and hotels, such as Subway and Hilton Hotels.
What is franchising a restaurant?
Franchising is one of the most flexible ways you can distribute goods and services. A franchisor can give you the needed training and support for starting a restaurant franchise business. Partnering with a fun and successful brand, such as Twin Peaks, which is a unique sports bar and restaurant, is a smart move.
What is the fourth requirement for a business?
4. Regulatory or Legal Requirements. A fourth requirement is satisfying any regulatory or legal requirements that the parent business mandates. While sometimes the requirements are simply obtaining permits and a lease, in other situations, it could involve educational requirements or specific licensing. 5.
What should a business plan include?
Your plan should include details, such as estimated investment expenses, besides projected returns. Most importantly, be sure your business plan is well written because this can make a difference in whether a lending company approves your loan.
What are the skills needed to be a successful business owner?
Are you able to comfortably interact with both employees and customers? Besides being energetic, you also need to pay close attention to details and be exceptionally disciplined.
Is it easy to start a franchise business?
The Bottom Line. The process of starting a franchise business isn’t cheap or easy, so it’s important to partner with a reputable parent company. There are several requirements you must satisfy before starting your business. Franchising is one of the most flexible ways you can distribute goods and services.
Where to start looking for franchise resources?
The best place to start looking for your franchise business resources is with the franchisor itself. They will have devoted considerable time and effort to providing you with the resources, guidance and support you need to succeed.
How much does it cost to buy a franchise?
Initial fees can run from anywhere from $50,000 up to several million dollars depending on the type of franchise you want to open. You will then be expected to pay a percentage of your revenue to the franchisor periodically to continue operating the business.
How does the market for a franchise business work?
The market for your franchise business depends very much on the franchisor you set up with. They will be able to provide guidance and expertise on the types of customers you should be marketing to, although you will need to carry out your own market research as well.
What do franchisors need to agree to?
Franchisors often have strict rules you will need to agree to. This could be anything from signage and staff uniforms to how you market and talk about your business. The agreements you have to sign are likely to be long and detailed.
Why is franchise important?
A franchise can be a great opportunity for a business owner with some capital to invest in their own and their employees’ future. It gives entrepreneurs an opportunity to partner with some of the biggest brands in the U.S. and provides built-in resources, training and expertise. In exchange for a franchise fee and royalties, they will provide you with support, training, stock, expertise and marketing to launch your franchise quickly.
What is franchising a business?
You get access to a business with a recognized brand, immediately setting you apart from independent businesses. Franchisors have spent time, effort and millions of dollars on building their brands and creating trust with consumers.
What is the most common type of business entity?
The most common type of business entity. An LLC is fast, simple and inexpensive to setup and maintain. It protects your personal finances and assets and is a great way to start your franchise business.
How to start a franchise business?
Your business model is up to you; however, you should always include: 1 The term of the franchise agreement (that is, how long it will last); 2 The geographic areas in which you are willing to place your franchises; 3 How big of a geographic area you are giving to each franchisee; 4 Training requirements; 5 How much the franchise fee will be; 6 How much the royalty percentage will be; 7 Whether you will provide equipment and products or the franchisee will provide same, and whether there will be an arrangement to split the costs; 8 Marketing strategies for the franchises; 9 How much net worth and business experience the franchisees need; and 10 Whether you prefer each franchise to have an owner/operator or master franchisees that develop more than one franchise.
How much does it cost to start a franchise?
The overall startup costs can run anywhere from between $50,000 to $200,000 - which is quite a wide range. Do your research on all the costs and when in doubt, round up.
What are the benefits of franchising?
Financial benefits. The franchisor can often negotiate lower costs for the items you sell if all of his franchisees use the same suppliers. This means that you have a higher profit. You also have access to marketing departments, and existing business infrastructure that you would not otherwise have access to if you set up an independent small business. This often includes preferential rates - discounts given to franchisees due to the large numbers using that particular supplier.
How does a franchisor help you?
Ongoing training. The franchisor usually offers ongoing training to keep you up to date on sales practices, laws and regulations in your chosen industry and how to run your business. The franchisor’s success is dependent upon yours, so they will invest time and energy in making sure you know what you’re doing and will help you make the franchise succeed. You will have a support system that you can access immediately.
How long do you have to wait to get a franchise agreement?
You must wait at least 10 days with this document before you can receive the franchise agreement.
How long does a franchise contract last?
You will need to consider developing an exit plan when the term ends. Terms are usually anywhere from 5-10 years, usually with an option to renew (though at a cost).
What is management franchise?
Management franchises mean that you hand the actual work over to tradesmen, while you are responsible for expanding the business.
What are the Benefits of Starting a Franchise?
One of the benefits of franchising is that you don’t have to build everything from the ground up. Think about it as baking a pie. Making the dough from scratch is half the work. It will take a lot of energy, and you’re not even sure it’s going to come out right. Buying a ready-made crust, or in this case, a franchise, will save you half the prep time. You do not have to be an experienced entrepreneur to be successful in your business endeavor!
What Does Franchise Mean, Exactly?
A franchise involves two parties – one business (the franchisee) pays another company (the franchisor) to use its trademarks and business model.
What is the fourth requirement for franchise?
The fourth requirement for starting a franchise business is to fulfill any regulatory or legal requirements demanded by the parent business or the organization that backs you internally. Sometimes, the requirement may only be a permit or a lease. Some other times, it can be your educational requirements or specified licenses. You can create a portfolio website for your educational requirements, showing all your credentials and experience in your professional career. Or, you can also create an educational website to showcase the web-based educational services you offer across different sectors.
Why is franchise important?
A franchise gives a huge opportunity for you to succeed as most of the infrastructure to start a business is inherited by you. Even though it doesn’t mean that your business is immune to risks, it is less risky than starting from square one. If you can understand your risks, you will eventually make your business grow globally.
Why do franchises offer staff?
Franchisors offer staff just to help out the franchisees, so they always have a helping hand when needed. When starting a franchise business, you will always receive the backing of a more prominent organization. The support is essential for operations, such as building, real estate, and marketing. Numerous franchises conduct marketing research to get the best site for a new location and negotiate the most appropriate deal.
What is franchise model?
Franchise models are one of the most common business models out there. Numerous marketing people are familiar with it, even though they are not entrepreneurs. It is a well-documented business blueprint, and it is bought by another party that is considered the franchise. The role of the franchiser ensures that the franchise is running the business appropriately to maintain the reputation of its brand image. Considering the work that goes behind the scenes in franchising, you must know its requirements. Below, we have mentioned some necessities for you to ensure that your business is working efficiently via franchising.
What is the first aspect of franchising?
Therefore, the first aspect of franchising a business is building a certain infrastructure to start out. Moreover, you should be aware of all the details surrounding the franchising of your business.
Is franchise training good?
If a franchise company provides workshops regarding a franchise model, you can consider it a good source of business education. These companies know the strategies and the costs required to start a business. Therefore, their training courses can be beneficial.
Do franchisees pay advertising fees?
If you want to know how to franchise a business, you must be aware of the advertisement fees associated with it. The franchisees pay the required advertisement amount to the respective franchisors. However, they gain lots of benefits from the invested money.
How much does it cost to buy a franchise?
The initial investment in a franchise can be pricey, and range anywhere from a few thousand dollars to over a million. If you're looking to purchase a franchise at a lower price point, there are options for you in a variety of industries.
How much does a franchise cost?
Every franchiser requires an upfront fee. This can range from hundreds to hundreds of thousands of dollars.
What is a franchise?
A franchise is a business in which independent entrepreneurs use the rights to a larger company’s business name, logo, and products to operate an individual location. The franchiser is the owner of the larger company who sells the rights to license their business, and the franchisee is the third-party owner and operator of the business locations.
How long does it take to run a McDonald's franchise?
The franchise term for McDonald’s, for example, is 20 years.
Why are companies actively looking for new opportunities?
They’re actively looking for new opportunities because they’re still in the initial stages of expanding their reach.
Is it good to own a franchise?
Owning a franchise has countless benefits. You can profit from the franchiser’s recognizable brand while essentially running your own operation. The most profitable franchises rarely fail, removing the risks typically associated with opening a brand new business.
Is a franchise one size fits all?
No franchise is one-size-fits-all. Entrepreneurs who want to open a franchise must take into account their budgetary constraints and the franchiser’s support system during the evaluation phase.
