How to Open a Franchise Business in 8 Steps
A franchise is, in simple terms, a licensing relationship. A company like Baskins or Starbucks usually operates this way by licensing its brand and using systems to interested individuals. As such, the company gives you the rights to sell their products, and in turn, you agree to pay a certain percentage of fees upfront and follow their conditions and guidelines.
Some examples of a franchise business include:
- Petrol kiosks
- Fast food restaurants
- Coffee houses
A franchise business is one of the many ways people earn passive income. It will depend primarily on the individual and how long and often they want to invest their time and effort. As such, one can balance their lifestyle and commitments to suit the needs of the franchise system. For example, one passive income franchise known as Xpresso Delight has over 150 franchisees, and the operators are anywhere between 20 to 60 years of age.
Are you interested in managing a franchise? Here are eight steps on how to open a franchise business:
Step 1: Identify your business
What kind of franchise suits you? There are several types of franchises to choose from, and you need to find something that suits your needs and lifestyle requirements. Maybe something that allows you to work from home, or in other words, use your home as an office space?
This will allow you to spend more time with your family and do the things you like instead of commuting from one place to another. Next, you would want to look out for a business that allows flexibility in terms of the hours that you put into it. This will enable you to balance time between other commitments and allow for greater efficiency in the schedule.
Step 2: Get info about the franchise
There are plenty of ways to get the information you need to make the right decision. You can either hire a franchise consultant, speak to other franchisees, or do some research online to help you. It would also help if you speak with a franchise lawyer for advice.
Step 3: Request a franchise application
Once you have gathered as much info as possible to match your situation and business environment with your choice of a franchise system, it’s time to narrow down your selection. Pick three of the strongest contenders and request a franchise application from each company.
Once you have filled in the application and submitted it back to the company, they should send you an onboarding or information pack. This will give you more information on their business model, financial outlook and other key figures to make the final selection.
Step 4: Choose your franchise and secure funding
It’s time to make the big decision- which franchise system will you invest in? Once you have decided, you will have all the information needed to create a business plan and present it to potential lenders. There are different financing options for you to consider, from small business loans from the government to bank loans catered to franchisees.
You’re looking for enough cash reserve to cover expenses until your business turns into a profit. For well-known franchises, you’re looking at getting profits a few months after opening.
Step 5: Sign the franchise agreement
It’s always a good idea to seek counsel from a lawyer with expertise in franchise agreements. They will help you understand and point out any specific details that you need to be aware of. Every franchisor has different negotiating terms in the contract. The lawyer would negotiate or find the best solutions for your particular situation.
Even if the agreement is rigid, remember that franchises are based on a proven and consistent system that has made their brand successful. Be aware that if the deal is too flexible and overly negotiable- it could be a sign of trouble brewing.
Step 6: Get all your insurance and permits
Part of opening any business is to obtain any permit and insurance required by the law in your operating country and industry. These also include regulations from the city or county that may differ from town to town.
The franchisor will usually supply this information to the franchisee- it’s part of the onboarding package given to the franchisee to open the franchisee with all the necessary compliance.
Step 7: Hire and train business staff
Once everything is set in terms of location, paperwork, funding, licenses and permits, it’s now time to look at hiring and training staff. Depending on the franchise type you have chosen, you will need staff to run the business daily. Most franchisors usually provide this training since they want a consistent brand, image and service level across all their franchises. This is one of the advantages of getting into a franchise.
Step 8: Open your franchise business
It’s an overwhelming process to start your franchise business, but starting is just the tip of the iceberg. You will need to market and advertise it so that potential customers are aware of your business operating in the area. This is all part of the business plan to run a successful franchise from a soft opening to a grand opening and various sales and promotions throughout the year. Running the franchise and keeping it afloat is the bigger battery.