How Do You Start A Franchise?
- Franchising is one of the successful business models that attract many people.
- By buying a franchise, you get into a business, which already has a successful track record.
- It is a kind of business, which gets operated by the franchisees but has a brand name linked to it.
- The parent company that owns that brand is the franchisor.
- While buying a franchise, you will not be alone as there is regular support from the franchisor, starting from the setup to running the business.
- It is a fascinating part of buying a business that attracts most people.
- If you are also the one looking to buy a franchise, then this article is for you.
- I will share all the details that you need to buy a franchise and get successful.
Types of Franchising
Before starting a franchise, you need to figure out the kind of franchise you would like to buy. Below are the different types of franchising to choose from:
- This franchise needs minimal investment consisting of a franchise fee and some primary equipment.
- The staff requirement is also significantly less.
- Below are some examples of job franchising.
- Cleaning Services
- Event Planning
- Pool maintenance
- Travel Agency
- Mobile Phones Accessories and Repairs
- Children’s Services
- Lawn Care
- As a part of the product franchise, you need to distribute the products and services of the parent company.
- The product franchises are dealers who deal with the products.
- Below are some of the examples of product franchise:
- Cars and repairing parts
- Vending Machines
- Large Equipment
Business Format Franchise
- Business Format Franchise is a business that you would run under the brand name of the parent company, and operate the processes and system following the rules of the parent company.
- The parent company gives a detailed plan, rules to follow, and training.
- All this will help you in setting up the business as well as running the business.
- Below are some of the examples of Business Format Franchise:
- Fast Food
- An investment franchise is a franchise that needs a large amount of capital investment.
- Initially, you will have to invest the amount and the management team.
- Also, you will be involved less in the business and gain a return on the amount invested.
- Below are some of the examples of Investment Franchise:
- Big Restaurants
- Conversion Franchise is the combination of all the five franchising.
- If you buy this franchise, you can use the company trademark, the training, and marketing.
- Moreover, you would not need to start from scratch because it is already a big brand name running for years.
- Check out the example given below:
- Plumbing Services
- Real-Estate Brokers
- Professional Service Companies
Steps For Starting A Franchise
Know The Advantages And Disadvantages
- It is essential to consider all the advantages and disadvantages before starting a business.
- Buying a franchise has a plus point that franchisors help in providing the required training, business advice, and marketing to make their brand succeed in the market.
- On the other hand, it is true that buying a franchise and starting a business is an expensive deal, as you would need sufficient capital as well as a well-equipped space for opening.
- But you can choose a business model with a good track record; you can successfully run your franchise with support from your franchisors.
Select A Franchise According To The Business Goals
- The next step is to select a franchise, which is a very crucial step.
- Choose a franchise keeping the below things in mind:
- Consider your weaknesses and strengths.
- The type of franchise model as per your business goal.
- Make a business goal, and choose a franchise that can assist you in fulfilling the goals.
Make An LLC
- It is necessary to start your franchise business as a limited liability company or an entire corporation.
- This is because an LLC or a corporation is liable for the tax breaks which are otherwise not available to the sole proprietors.
- Moreover, franchisors like to work with LLC because an LLC or a corporation makes your business more credible.
Do A Thorough Market Research
- Market Research is another crucial step before you start a franchise because, for a successful business, it is necessary to understand the market conditions.
- There are franchising consultants who can assist you select the best franchise according to your goals and the market conditions.
- In addition to this, you can get Franchise Disclosure Document (FDD) from the franchisors of your interest.
- This FDD document contains detailed information about the opportunities present in that particular franchise.
Create A Business Plan
- Once you have selected the franchise, the next step is to create a proper business plan.
- This plan will let you get organised and proceed with formal planning.
Source Your Finance
- First of all, you need to take care of the sufficient funds required for buying a franchise.
- These funds include the fee of the franchise, startup costs, and working capital.
- There are various options to get these funds.
- Different finance companies
- Family and friends
- SBA loan
Sign The Franchise Agreement With Franchisors
- You should get into a binding contract with the franchisor.
- Before signing a binding contract with the franchisor, you must read all the terms and conditions.
- Also, you should hire an attorney to understand all your obligations and rights written on the agreement.
Understand The Business Requirements Carefully
- Every state has some requirements regarding the license and permits for starting any business.
- These licenses include tax registration, occupational license, health permit, and business license.
- These licenses are necessary.
- Otherwise, the government may impose a fine or give punishment.
- The franchisor may also not be interested in creating a business with you.
- Thus, it is necessary to understand the various license requirements and apply for those licenses.
Get The Location, Hire Employees, And Attend Necessary Training
- The franchisors have specific requirements regarding space and location.
- They provide the custom fixtures and blueprints so that you can get your space ready for the opening day.
- While the space building is in progress, you can hire personnel to work for you and attend the training offered by franchisors.
- All in all, buying a franchise is a profitable business that involves less risk than other businesses.
- With proper research and planning, buying and running a franchise can be successful.
- However, it is suggested to perform appropriate market research, choose the correct business model, take legal advice, and understand the agreement, disclosure document, etc.
- We hope all the information shared in this article will guide you in buying a franchise.
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Q. What are the different funding options to buy a franchise?
Ans. Funding is an essential factor to buy a franchise. Before you buy any franchise, first consider the amount of the investment required and consider the below options as a source of your funds:
- Rollover for Business Startups: It means taking the funds from your retirement account.
- SBA Loan: Government guaranteed loans available at less interest rate.
- Traditional Bank Loan: A traditional way of taking a loan from banks.
- Franchisor Financing: Loan provided by the franchisors themselves.
Q. How much will it cost me to start a franchise?
Ans. The total cost to start a franchise consists of the initial purchasing cost, opening inventory, and working capital. The total amount varies according to the franchise model you select. You need to figure out the total amount required and sources to get that amount.
Q. What type of assistance will I get from the franchisor?
Ans. The most beneficial thing about starting a franchise is the support from the franchisor. They provide the required training, blueprints of required design, trademark, and advertising. Some franchisors also offer the loan to invest in the business.
Q. What risks are involved in buying a franchise?
Ans. Every new business has some risks involved though it is less in the case of a franchise. It is because most of the franchises are already succeeding. It is suggested that before starting or investing in any franchise, you should investigate the company, the earnings, and claims by the company. You can take assistance from legal advisors, market research, and create a proper business plan.
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