A lot of people are drawn to franchising. If it’s right for you, it can be a road map to profitable business ownership. You can get in on a great idea or successful business that has a track record of success and a strong brand, and still run the business yourself.
Franchise expert Joel Libava defines a franchise as “a type of business that is owned and operated by individuals (franchisees) but that is branded and overseen by a much larger—usually national or multinational—company (the franchisor).”
Having a franchise means you’re getting on the bandwagon of an idea that’s already proven successful. Of course, as with any business, there are still challenges involved in starting a franchise and running one. As much thought will have to go into location, hiring, and management as any other type of business, even with the business model and brand laid out for you. And for some entrepreneurs, the loss of control (you are ultimately overseen by the franchisor) can be a challenge to the fiercely independent.
So you now know that you’ll have to find the right franchisor if you wish to become a franchisee. You want a popular brand, and a company with a good reputation for supporting its franchisees. How do you get there?
6 steps to franchise ownership:
- Know your budget. The first thing you should know is that there is always an upfront franchise fee, and franchisors often have financial requirements for whom they’ll allow to open one of their franchises. Go over your personal finances and assets so you can start looking for opportunities in line with your price range.
- As with so many things, do your research. For example, a Cafe Yumm franchisee must have a net worth of 500,000 dollars. If that isn’t where you’re at financially, look elsewhere. You don’t want to waste time dreaming up your plans to open a specific franchise, only to look at the fine print and realize it’s not a good fit.
- Reach out to the franchisor and other franchisees. You want as much detail and firsthand information as you can get about what it’s like to actually operate this franchise. There’s no substitute for face time with the people who’ve been there and done it before. One key question to ask franchisees, suggested by Joel Libava: Would you do it all over again?
- Typically, both the franchisor and the franchisee will undergo an interview process. This could take the form of conference calls, visits to their headquarters, and sit-down meetings. It will vary depending upon which franchisor you choose, but the goal will be for both you and the franchisor to go over the nitty gritty specifics and determine if the franchise is right for you. Take note of things like how much support the franchisors offer during setup, and if they provide ongoing training.
- Sign the franchise agreement, and make your investment. There is an upfront fee paid to the franchisor, and usually additional investment expenses such as kitchen or cleaning equipment. This is where it all begins.
- If all is going well, renew your franchise agreement when it ends to continue your business ownership. Typically, these agreements are five to 10 years long.
Types of franchises
Now that we’ve covered the general steps for opening a franchise, we’ll explore a few of the industries a franchisee could decide to partake in. There are over 3,000 franchised brands in the U.S., so we can’t cover everything, but let’s take a look at some of the most popular types of franchises that are available.
- Restaurants. This is, of course, what immediately jumps to mind simply because these types of franchises are everywhere: McDonald’s, Jack in the Box, Subway—these chains are incredibly popular. In fact, as of 2014, Subway has the highest number of franchise units in the United States at 26,000. A low failure rate and low initial fee have helped fuel its popularity. If that piques your interest, I’ve included two of our free sample business plans for franchise restaurants in the resources section below.
- Children’s entertainment/education. These types of franchises range from tutoring centers such as Mathnasium and Kumon, to play places like Adventure Kids Playcare. This industry made Entrepreneur’s list of top franchises to watch in 2015.
- Personal services such as maids and handyman services. Merry Maids is an example. Unlike many franchises which sell a product or experience, this type of franchise is going to depend heavily on its employees and therefore on its hiring practices.
- Fitness outlets, like gyms and various studios for specific activities such as Pilates. Anytime Fitness is a good example here; Forbes ranked it number five on their list of best franchises with an initial investment of over $150,000.
- Beauty/spa industry. Some examples that fall in this category include: Supercuts, a hair salon franchise, and Massage Envy, which has a variety of services, including massage and spa treatments such as facials.
We’ve got a lot of resources for you to explore as you delve deeper into your research on franchise ownership.
Sample business plans:
One of our greatest assets on this site is our free sample business plan library, and it includes several different options for franchise business plans. These are a great way to get your feet wet and check out some examples of what a franchise looks like on paper, from mission statement to the financials:
- Sandwich Shop Franchise Business Plan
- Pizzeria Franchise Business Plan
- Retail Hardware Franchise Business
- Athletic Shoe Store Franchise Business Plan
We’ve got a category page for franchises, so you can always check back and see new franchise-related content as it appears. Here are a few articles to get you started:
- What Is a Franchise?
- The History of Franchising as We Know It
- Thinking about Buying a Franchise? Consider These Pros and Cons
Joel Libava, the declared “Franchise King,” holds a conversation with Palo Alto Software CEO Sabrina Parsons about finding the franchise that’s right for you:
The experienced path
Cooking up a brand new idea has its value, but there’s no reason you can’t piggyback on a time-tested method and reap the benefits, as many franchisees are already doing today. With planning and thoughtful execution, a franchise business is a rewarding enterprise.
Have you started a franchise? How did you choose your brand and franchisor? Tweet us your stories!