How To Start A Franchise Business

How does owning a franchise work? Are you an entrepreneur thinking of owning a franchise of your own? Is franchising right for you? Just like any other business, owning a franchise is also a risky venture having its benefits and downsides.

The decision of owning a franchise takes a long-term commitment.

It is not advisable to start the planning of owning a franchise system by forming a committee with friends or family members who don’t even own a business. It may very well lead to failure.

Owning a Franchise – Advantages and Disadvantages – How Much Will it Cost?

Is owning a franchise worth it? Do you know that 4 out of every 5 American franchise opportunities fail in the first few years of franchising? Some of the reasons include

• Over-regulation.
• Litigiousness of the industry.
• Lack of capital.


Advantages and Disadvantages of Owning a Franchise

What are the advantages and disadvantages of owning a franchise?

Owning a franchise is quite an enormous task and it requires considerable amounts of finances, time, and also proper planning. Once it starts to operate, you’ll recognize that this business can be very profitable if done whole wholeheartedly.

In this post, I will be sharing some possible steps of owning a franchise, and the pros, and cons of owning a one so you can weigh it, and see if you should continue with your drive for the project.

Steps To Owning A Franchise Store


  • Understand what a Franchise Is and How it Works

How much money can you make owning a franchise? Before you begin, you need to understand the meaning of the word franchise.

Franchises are business systems in which the franchisor (company) permits the franchisee (independent operator) to distribute and sell their services and products with its trademark.

To purchase the franchise, franchisees have to establish a contractual agreement with the franchisors. This agreement contains terms and conditions which have to be signed by the franchisee. These are largely binding.

  • Requirements to set up a Franchise

First of all, you will be required by the Federal Trade Commission to prepare a standard disclosure document for your franchise.

This document is called the Uniform Franchise Offering Circular (UFOC) required by all companies. In addition to this, many states have their requirements.

Make sure that you look into the laws of the state you plan to franchise in.

Second, you will be required to prepare an audited financial statement for the franchise company.

This is one of the requirements under the legal section we mentioned above. You won’t be able to complete any of the legal requirements until you have first completed the financial statement.

You will need an experienced accountant that is familiar with franchise accounting. This person will advise you on the financial structure of your enterprise.

  • Learn from People that have Started Before You

It may seem like a simple observation, but many people are running their successful franchises. Some people have failed – and you should speak to them all.

Why? Because they will have valuable insights into what worked and what did not, and this will simplify your franchise journey.

  • Prepare a Detailed Business Plan

You should write a detailed researched business plan for your franchise business for at least 2 to 4 years. This will be a benefit for you in the future as it can be a guideline throughout the life of your franchise business.

It will prove to be a good path to assist you in overcoming future obstacles.

If you are still a newbie in the business world, you can take some classes to gain knowledge in the business field you are interested in. Many colleges offer short-term classes that cover these courses within 6 months.

Alternatively, business consultants can also help you with valuable advice.

  • Establish a Franchise Agreement and Fee

As you are considering owning a franchise, you have to prepare a franchise agreement.

This document will permit the franchisee to run the business according to the specified legal obligation and intellectual property rights.

The agreement must meet local law requirements, and it should protect the franchiser and present a working document to the franchisee.

One benefit of owning a franchise is the fees you get from your franchisees. It is the first thing you need to consider to keep the business running. A franchisee will be required to pay an initial fee to the franchiser for the privilege of joining the franchise network.

Franchisees may also pay management fees, although they are sometimes included in the wholesale price of the product. Lastly, the franchisee pays ongoing royalty fees that represent a specified percentage of its profits.

How to Invest Money Into Franchise

How do you choose a franchise that is right for you? Let the truth be told, irrespective of the business scale; small or large, even franchising, takes money to kick start and run.

Investing in a franchise business needs cash flow and reserve capital to maintain, keep, and enhance the movement of the business non-stop.

Do you have the capital and don’t know what to invest in? Why don’t you consider investing such money in a franchise business – Just a piece of advice hope it turns out well in finding the right franchise for you.

Do you need the brilliant ways it encompasses to invest in a franchise?

Are you a lover of franchise business but doubting whether to invest in it or not? No matter the approaches you may view this, buying a franchise is a golden opportunity to make a way in business real quick.

How? Fine.. because you are taking up a business that has already made a name and gain ground almost everywhere.

As a franchise investor, you are liable to meet different managers, have their backing, support, and learn more about business know-how from them, and indirectly your business orientation will be booming.

Selecting a franchise worksheet answers
The following are the steps to starting a franchise business and the way to ply if you are interested in investing in a franchise opportunity.

How To Find The Right Franchise For You

1. Deal with Franchise Business of Your Qualification

The knowledge, skills, and qualifications you have in your possession should come first before investing your capital in a franchise opportunity.

Check on the company you want to franchise with if they are into the business you are knowledgeable about, and at the same time if their business opportunities meet your desires and need.

It is very wrong for an individual who worked and gained experience at a reputable restaurant to invest in a dry cleaning and laundry services franchise opportunity – the two have nothing in common, but it is ideal and logical if someone with a fast food experience franchise with Subway, Wawa and other fast food business company who have a franchise program.

GUIDE: How Do Cleaning Franchises Work?

Investing in a franchise business you have the skill is a true and sure ticket to your liberation, breakthrough, and success.

2. List out those Franchising companies that interest you

Verily! There are many franchising companies out there and the fact that you will have up to three or four of them that interest you, it is advisable you take out your jotting note and embark on slight research.

Carry out research on each of the franchising companies that stands out to be your favorites, research on their franchising fee, the startup costs for each of them, their requirements, terms, and conditions, etc.

The startup cost of the franchising companies differs from one another, it is, however, leftover to you to determine which of them meet your demand and which among them will you be able to afford.

Some franchise requires you to have $10,000+ and we have a host of them that require hundreds of thousands of dollars. Be wise and watch your pocket before you choose.

3. Consider the Failure Rate

One of the fears any start-up business owner does have in mind is the fear of failure. The fear to invest a huge amount of money into a business and at the end of the day, joining the team of the unsuccessful business.

Research again and check for the rate of failure on each franchising company under consideration.

It is evident that the rate of their failure record varies just like the startup costs, all these reasons need to be taken cognizance of before investing in any franchise company.

Some franchise businesses fail because of their lack of confidence, some suffer from overconfidence and some are inexperienced.

4. Check out for Competition

Before deciding on which franchise business to go for, it is expected of you as an investor to check and access your environment for the number of similar businesses you aim to franchise.

For instance, if you are planning to take up Wawa Restaurant you need to consider any business related to a restaurant in your environment irrespective of the brand.

5. Highlight your Budget for the New Franchise Business

Looking at the franchise as a concept, it has economic importance which is advantageous to the investors and that is, the franchise fees cover half of the startup costs.

How much does it cost to invest in a franchise?
The franchise fees cover a larger part of the startup costs though that doesn’t guarantee you that there wouldn’t be some financial crisis along the way if care isn’t taken, most especially during the trying, dry, and long time – before you gather your potential customers to patronize you.

6. Review Carefully all the Franchise Paperwork

You must read and review all the documents involved in the course of signing up the franchise agreement before you sign any. Hire an attorney to read and explain anywhere you find complicated or involve legal terms.

Legal representation of business like the franchise is necessary and a fine and sound attorney will be of great help to you especially in spotting some difficult language or aspect you might have unintentionally skipped.

And finally, apply for the franchise!

That is if you follow the given instructions on how to invest in the right franchise business.

The Pros of Owning a Franchise

• Brand Recognition: One advantage of owning a franchise is that you easily get brand recognition for your business. Since it is a franchise business, it means there will be many outlets carrying that brand name which may lead to many people seeing it and recognizing it by giving your products or services a try.

• You’re the Boss: With a simplified system of running the business in place, you don’t need to stress yourself. Your main job is to manage the business and profit from it. This is one of the benefits of owning a franchise.

Cons of Owning a Franchise

• It’s Expensive to Start: It is more expensive to own a franchise than to build a normal business. This is because of the process involve and the technicality of everything.

SEE: Top Franchise Opportunities to Invest in

That being said, it is now up to you to take that final step. Make that decision after careful thought and considering all the aspects. Once you have made that decision, go for it. Best of luck!