Are you looking to do something different in your career? Maybe you’re not ready to retire and you’re looking for a great second act. You could be one of the 60% of workers who aren’t happy with their jobs.
There are many business options out there, and few are more appealing than starting a franchise business. You have a turnkey business model that’s been proven to work, so your risk is lower.
At least that’s how it should be. There are still risks involved and you need to know how to start a franchise business to make it work.
Keep reading to learn the steps involved to start a franchise business and make it profitable.
Are you about to start a business for the first time? One of the things that you need to do as a business leader (yes, you are a leader now) is to assess your own strengths and weaknesses.
This self-evaluation is an important step in building a business. It gives you the best opportunity to be successful because you can fill in your own skills gap.
You also want to be thoughtful about the type of business you want to build. Some franchises and industries will be more demanding than others. For example, the educational enterprise is a growing and profitable sector, as people are always looking for ways to improve their skills and knowledge. Starting an educational franchise can be a good opportunity to invest in, but it requires careful research and consideration. Some popular educational franchises include tutoring centers, test preparation services, language schools, and children's learning centers. But you should also consider the target market and location of the franchise. For example, a tutoring center specializing in math and science may be a more profitable educational franchise in an area with a large number of tech companies and high-tech workers, while a language school might do well in a culturally diverse neighborhood.
Take the time to consider the lifestyle that you want to have and why you want to start a franchise business. You might expect to be hands-off while employees run the business. Keep this in mind as you go through the steps of picking an industry and franchise partner.
You can start a franchise in just about any industry, though some industries are better suited to franchising than others. You can gain an understanding using Your Company Formations as a registered agent of how good the industry is for your desired franchise.
You want to look at industry trends over the past five years and the outlook for the next five to ten years. This will help you choose a profitable industry. In real estate, franchises have a high profit margin, which is something to consider.
You also have to think about the overall competitive environment in your area. You want to see if there are other competing franchises and how they operate.
For example, if you want to start a commercial cleaning franchise, you will need to assess the opportunities in your local area and the competition. If it’s a highly competitive field, it doesn’t mean that you shouldn’t pursue the opportunity.
You’ll need to be creative in how you market the business and choose a franchise partner like Franchising Path that can help you beat the competition.
The most important part of starting a franchise business is the financial piece. Some franchises will cost more to start than others.
Franchise fees can range from $2500 to more than a million dollars. Some will require that you have a net worth of at least several hundred thousand dollars.
Basically, you can assume that the bigger the name, the bigger the franchise fee. It’s not just the franchise fee that should concern you.
You’ll need to make sure that you’re going to see a return on that investment.
Picking a franchise partner is like entering a marriage. It’s a huge commitment that takes a leap of faith, but you need to do your due diligence before signing up.
How can you make sure that you pick the right franchise partner? It’s a process and you need to take your time. Like a marriage, it’s very unwise to rush anything.
You want to start by researching different franchises in your chosen industry. These are some of the top questions you want to ask:
That’s not all of the questions that you should ask. You’ll want to interview other franchisees to get their take of working with the franchise.
For example, if you’re interested in franchising with Mosquito Authority franchising, reach out to franchisees and find out the advantages of working with the business.
After you interview other franchisees, get a copy of the franchise disclosure form. This is a document that outlines the potential risks of starting a franchise.
You’ll need to look at a few things like the turnover rate of the franchise. This is the percentage of people who sold the business or left the franchise to become independent. A high turnover rate could be a sign of trouble, so tread very carefully.
Once you have settled on a franchise, you’ll need to write up a business plan. This will help you get financing for the business and give you a road map to start the business. Also, keep in mind that licensing and franchising are two very different things. When it comes to licensing vs franchising, you might want to do a bit of research and be prepared when it comes to their differences and similarities.
Your business plan will go through the competitive environment, the risks involved in starting the business, and how you plan to mitigate those risks.
You’ll also have to create a lot of spreadsheets to show how much it costs to start the business, the monthly operations costs, and when you’re going to be profitable.
You’re getting closer to starting your franchise business, and this is the moment when it becomes real. You have to register a business name with your state.
You’ll also decide on the legal structure of the business, whether that’s an LLC or another form of corporation. In most cases, an LLC is appropriate. However, you should consult with a tax and legal professional for the best option for you.
Your business structure can have many legal and tax implications that you may not be aware of.
Take your business plan to the bank and get the funding to start your business. Fortunately, there are many options to obtain financing to start your business beyond traditional banks.
You can partner with other investors, use a peer-to-peer lending platform, or use crowdfunding for financing.
The franchise agreement is a contract that outlines what your responsibilities and requirements are to be a franchisee and maintain your end of the bargain.
You need to read this several times over and have an attorney review the contract as well.
Once you have the foundation in place, it’s time to build your team. You want to hire people based on the strengths and weaknesses assessment you did way back when you first thought about this venture.
You may have found that your strength is in customer service and marketing. Your weakness is in bookkeeping and accounting.
You’ll need to make your first hire a bookkeeper and accountant to handle your financials. You’ll need to hire employees that will help you with operating and managing the franchise when you’re not there, too.
If your franchise is in a physical location, you’re going to need to build out the location. Whether you’re a fast-food restaurant or a fitness franchise, you’ll need to make sure that you have the interior remodeled according to the franchise rules.
You may have to purchase specific equipment or use colors that are consistent with the branding of the franchise. You’ll need to review this with your franchise. They may send someone from corporate out to see how things are moving along.
In some industries like fitness, your success will depend on the interest and buzz that’s created well before you open your doors.
You need to have a pre-sales campaign to encourage members to sign up at a discount before the location is built and ready to go.
You’ll also need to plan a grand opening ceremony. You should consider becoming a member of your local chamber of commerce. Chambers are known for supporting new businesses and hosting ribbon cuttings.
Congratulations, you made it through the grand opening of your franchise. The fun doesn’t stop there, though. In fact, your adventure is just beginning.
You’ll need to work on marketing the business, providing excellent service, and giving people a reason to try your franchise.
You’ll want to encourage people to leave reviews online and create local directory listings. When people are looking for your product or service, they’ll see your business and be encouraged by the positive reviews.
One of the things that you have to do when you’re starting a new business is research. It takes time and patience to start a business. That’s one of the biggest mistakes that new business owners make. They just open their doors and expect a windfall to happen.
Once you understand how to start a franchise business, you can take one step at a time to thoughtfully plan and build your business. The more work you put in upfront, the easier it will be to launch and maintain your business down the road.
Are you ready for more articles on starting a building a thriving business? Head over to the Entrepreneurship section of this site for more great content.