How to start a franchise – What’s the first step to opening your own franchise? Deciding whether it’s the right move for you. If you have what it takes to be your own boss, this guide will give you the best information about how to start a franchise business and its pros and cons so that you can make an informed decision about whether it’s the right move for you and your future business endeavors.
What is a franchise?
Starting your own business can be daunting, but having an established brand behind you can add credibility and lessen some of that fear. That’s why franchising is one of America’s fastest-growing sectors—you get all of a parent company’s resources without starting from scratch.
A typical franchise relationship runs for 20 years and costs roughly $500,000 to set up; you have start-up costs as well, so it’s not cheap. But doing your homework (and making sure there are ample opportunities in your market) will help ensure that everything goes smoothly with your new venture.
And, if you’re feeling ambitious, you can also take on multiple brands at once—think Sonic/Arby’s or Boston Market/Blaze Pizza.
There are three basic types of franchises: product-based, service-based and multi-unit. Depending on your circumstances, you may benefit from owning one type more than another. Be sure to fully understand which category best describes your business before jumping in headfirst.
If you’re still unsure, contact SCORE or your local Small Business Development Center for guidance. (To find help in your area, go here.) Your franchise type can affect everything from supply chain management to company culture and growth plans. The good news is that each franchise type comes with its own advantages; there’s really no wrong choice here.
Before you can open a new franchise, there’s typically a fee to pay (this is called an upfront franchise fee). The amount of money you have to cough up depends on what kind of business it is and where it will be located.
For example, an upfront franchise fee for one type of business might be $5,000 but for another it could be $200,000 or more. In most cases, you’ll also have ongoing royalty fees and additional costs as well (like marketing fees). So make sure you do your research before signing any paperwork!
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Most new franchisees have no idea how much money they’ll need in startup capital—and that’s okay. Money isn’t everything, but it is important. With that said, you should definitely do your homework and estimate startup costs as accurately as possible before moving forward with your business plan.
The best way to do so is by tracking down other franchisees in your area and working alongside them for a day or two (more on that later). If you don’t know anyone personally, try hiring an entrepreneur mentor who has experience working in franchises .
The first step in your franchising journey will be signing a franchise agreement. This is a legal contract between you and your franchisor, binding both parties and defining all of their rights and responsibilities.
Be sure to read through an entire agreement before signing—take note of how much control you’ll have over your business’s operations, how much money you’ll need up front, what happens if one party defaults on his or her duties, etc. When reviewing agreements, ask yourself whether there’s anything that concerns you—and if there is, use it as motivation to seek advice from an attorney.
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Before beginning any franchise for business or company, be sure you have all your finances in order. You need to be sure that you are able to invest without placing yourself at risk. If you don’t have enough cash on hand for security deposits, inventory or licensing fees, it may be wise to wait until you do.
Or if you already have these items covered but aren’t able to take on loan payments and other business-related costs from your personal funds, it might make sense for you to simply sign up as an employee rather than invest in starting a franchise.
Once everything is squared away with your personal finances and savings accounts, begin looking into franchises.
That’s is how to start a franchise for company, business, restaurant or from scratch. Don’t forget to read other article about business or invesntment in this website.