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You are here: Home / Money / 13 Easy Ways to Start a Franchise

13 Easy Ways to Start a Franchise

how to start franchise restaurant or business

If you have decided to start a franchise, you are about to embark upon an exciting journey of financial independence. However, the journey is also bound to be fraught with initial hiccups, ongoing hassles and of course needs significant investment of time, money and efforts. Here are some tried and tested tips for starting a franchise business.

1. Assess your capital

Never open a business, franchised or otherwise, unless you have sufficient capital reserves. According to the authors of So You Want to Franchise Your Business, one needs at least $100,000 to $150,000 in capital to properly franchise the business. It is also very important to keep a realistic expectation about income, at least in the beginning. New franchisees may not always make a ton of money right away in the first few months. So, you must plan your finances in a way that you can at least make profit over time.

2. Take an honest look at your skills

Assess your strengths and weaknesses as a potential business owner. Ensure that any franchise you consider is a good match for your skill sets and personal interests. Be thorough in your evaluation process and leverage as many data points as possible.

3. Have a strong network

Talk to several franchisors to know about their experiences. A strong support system of advisors can help you get what it takes to build a strong system. If you have the finances to do so, do consult a franchise expert or a lawyer who can help you get your company off the ground.

4. Assess risks

Every business franchised or otherwise, is bound to have risks. The key to success is to assess those risks, determine whether you can afford to take those risks and also seek guidance from experts to minimize those risks.

5. Trademark registration

Be farsighted enough to select a trademark that is acceptable and protectable in possible future international target markets. Otherwise, you might have to use different trademarks for same product or service. If needed, consult a legal expert with experience in international trademark practice. You must also adequately protect technology and other trade secrets that key elements of operating your franchise.

6. Outline operations and policies

Come up with an operation manual to define your policies to maintain your system and brand standards. You also need to take into account following obligations about franchise set up:

  • Site selection/lease
  • Pre-opening leases
  • Site development
  • Warranties and customer service requirements
  • Territorial development and sales quota
  • Ongoing product/service purchases
  • Insurance
  • Advertising
  • Staffing
  • Records and reports
  • Inspections and audits
  • Renewals
  • Dispute resolution

7. Legal documentation

how to start franchise for dummies

One of the most important legal documents, as far as the franchise business is concerned is the FDD or the Franchise Disclosure Document. This document is in place to protect prospective franchisees from unscrupulous franchisors. Here are some of the items in the disclosure:

  • Title
  • Business experience
  • Litigation – Any pending/concluding litigations over past 10 years for franchisor
  • Bankruptcy – Enlist all bankruptcies over past 10 years for the franchisor, affiliates or owners who have management responsibilities to the sale or support of the franchises.
  • Fees
  • Initial investments
  • Restrictions on products or services offered
  • Obligations
  • Financing
  • Territory
  • Trademarks
  • Patents and copyrights
  • Restrictions on what the franchise may sell
  • Use of public figures to manage/control or promote
  • List of outlets (This is a 3-year record of how many company owned and franchise units have been opened/closed/terminated operation/transferred etc.
  • Financial statements – past 3 years financial records
  • Contracts

Once you receive the FDD, you need to sign it and hand the receipt page over the franchisor.

8. Financial statement

Some states have the rule to financially audit the company before they offer franchises. A franchise consultant or attorney can guide you.

9. Registration

Currently, 30 states in the USA regulate franchise opportunities. So potential franchise owners in these states need to go through a formal registration and review process. The state laws also make changes to FDD based on their specific concerns. There are also business opportunity and relationship laws to be considered. Depending on the state you live in, it can take between 30 and 90 days from the date the original FDD is prepared and registration applications submitted for approvals to be granted.

10. Undergo training

Many franchisor companies offer initial training programs to potential franchise owners. Training can be held at your location or the franchisor location. The length and content of training will depend on your business. For example, if your franchise is about home improvement or landscaping, then training will focus on sales and customer service. The objective of a good franchise training program is to equip you with skills to help you implement the franchisor’s processes in your business.

11. Advertising and marketing

Advertising your franchise means you need to have a web presence. Franchisors who have a comprehensive website go a long way as it fosters communication between the franchisor and franchisee as well as franchisees and their customers. Many brands also scrutinize the tools the franchisor will provide in return for their royalty payments. One must consider search engine optimization although it can be very costly. Blogs and social media are an inexpensive way to build an online presence. You need to account for funding your advertising and marketing efforts in the beginning and that should be a large part of your financial plan. You must also create a marketing plan that will work in many different markets.

12. Establish a strong vendor base

The success of a franchise lies in its ability to offer consistency in its products and services. For this reason, a franchise owner needs a strong team of vendors. The vendor selection process is often fraught with issues because of how much control the franchisor is allowed to exercise over the vendors.

how to start franchise business

13. Continuous communication with franchisee

An ongoing challenge faced by franchisors is establishing and maintaining communication with the franchisee. As your business grows, you might often find it difficult to maintain personal contact with the franchisee. Therefore, you must have a system in place to acquire feedback and avoid dissatisfaction.

As can be seen, there is a lot to take in before you can start a franchise restaurant or business. Read up all you can about the process; these following resources can give you plenty of guidance and information you need:

  • 2019 Best Franchise Books
  • Franchising for Dummies

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