Franchising Basics

Starting Your Franchise

Before embarking on your business ownership journey, it’s a good idea to know exactly what to expect as you move through each step of the process. We’ve created this guide to help you do just that, and to give you some useful tips about the early stages of becoming a first-time franchisee. If you’d like to know more about the franchise model before you get started, take a look here.

Start with some focused research.

If you’re reading this, you’ve got the right idea. Franchise directory websites like America’s Best Franchises are great places to dive into franchising – we’re a one-stop online resource with all the unbiased info you need to know before you begin your journey to franchise ownership on top of our lists of hundreds of the country’s top franchises.

So, what do you need to know?

Once you’ve found a franchise or two that suit your skills, experience, budget and location, take a closer look. Because a franchise investment is such a big decision, there’s no such thing as too much research. You have to evaluate each franchise on two levels – whether it’s a viable business model in the current market, and whether it’s right for you. When looking into a franchise, consider the following:

Industry

  • What does the future for your industry look like? What might change?
  • Who are the top competitors in the industry? How do they compare?

Brand History

  • How long has the brand been around?
  • How has the brand performed in the past? Were there notable failures? Successes?

Current Status

  • Where does the brand stand in the market today? How’s its reputation?
  • What’s the success rate of existing franchisees?

Leadership

  • Who’s running the show? Is anyone leaving soon? Anyone new coming aboard?
  • What kind of experience and vision are they bringing to the brand?

Goals

  • Where does the company intend to be in 5 years? 10?
  • Can the brand’s system sustain its growth goals?

Products & Services

  • Are there new products or services planned for release?
  • What does it cost to produce?

Research & Development

  • What amount of research goes into determining a viable territory?
  • Does the brand conduct consumer research? What have they learned?

Operations

  • How often, if ever, does field staff visit each franchise?
  • How many employees are needed daily? What are their roles?

Marketing

  • To what extent is marketing collateral provided by the franchisor?
  • What percentage of sales is dedicated to marketing and market research?
  • Are grand openings well-advertised by the franchisor?

Franchising

  • How long has the brand been franchised?
  • Do any of your franchisees own multiple franchise brands?
  • How quickly can franchisees open a second location?

Support

  • In what ways do you protect franchisees from poorly performing franchises?
  • Is there a Franchise Advisory Council or other similar franchisee advocacy group?
  • What level of real estate, development and construction support does the franchisor offer?

Training

  • What kind of training is offered to franchisees?
  • How long will it take to complete? How much will it cost?

Process

  • How long will it take to open a franchise after the initial application is submitted?
  • What documents are expected from the franchisor? From the franchise candidate?

Costs

  • What’s the total estimated investment required to own and open a franchise?
  • Can any of the costs or fees be financed?
  • What royalty or other continued fees are there? How are those fees calculated?

Don’t just take our word for it.

You might be able to find a lot of the answers you’re looking for right here on America’s Best Franchises – but you’ll likely have some lingering questions. Once you’ve read all you can about your chosen franchise here, peek at these other sources for more (and more detailed) information.

Franchise Website

Hopefully, the franchise you’re looking into has a place online with all of their franchise information. Often, this is where you’ll be able to get an idea of the franchise opportunity and then find the contact information for the franchise development team. Even if you’re not ready to sign the dotted line, it’s good to reach out to let them know you’re interested. They might send you an informational packet or brochure or set up a call with you to tell you more about their opportunity. That way, they’ll be able to answer any questions you might have.

Reputable Business Periodicals

Lean on the widely-read newspapers and magazines that you trust to do some of the investigative work for you. Check for recent write-ups about the company or industry in The Wall Street Journal, Inc., Fortune, Business Insider and Entrepreneur. You can also look into industry-specific publications like QSR Magazine, HVACR Magazine or Green Industry Pros for an insider’s look at your industry of focus. Finally, take a look at franchise-specific sources like Multi-Unit Franchisee Magazine, Franchise Times or the International Franchise Association website for any new and information related to your chosen franchise or industry.

Trade Shows and Conferences

Conferences are a great way to meet and mingle with your entrepreneurial peers. Industry trade shows might give you a chance to connect with vendors and owners in your field and do some recon into market news. Franchise industry gatherings like the International Franchise Expo, IBA/IFA Joint Conference, Multi-Unit Franchising Conference, IFA Annual Convention, or The Entrepreneur’s Source Conference are phenomenal places to meet and greet franchise owners and operators from any industry and learn about other opportunities.

Current Franchisees

The people who’ll have some of the best info for you are those who’ve already gone through the process themselves. Arrange a meeting with a current franchisee and pick their brain about the opportunity. Don’t be afraid to ask the tough questions – Are you happy with your decision to franchise with this company? Would you do it again? – and get an idea of whether you could see yourself doing what they do. You can get contact information for current (and sometimes former) franchisees from the franchisor – this info is often included in the FDD.

Leave no stone unturned.

Don’t forget to read up on your chosen franchisor’s main competitors – their model might expose shortcomings or strengths you may not have seen in the franchise you’re shooting for. And, as with any research, double check all the information you find and verify as much as you can.

Dig into the FDD.

After you’ve had a few conversations with the franchisor and you’ve both decided it seems like a mutually beneficial partnership, you’ll fill out an official franchise application or request for communication (RFC). In response, they’ll send you a copy of their Franchise Disclosure Document (FDD), which is packed with information on every facet of the opportunity – which can make it a little overwhelming.

It’s a smart idea to look it over with an experienced franchise lawyer and a franchise accountant to make sure you’re clear on the details. Of particular importance is Item 19, the section in every FDD that demonstrates the company’s unit-level financial performance in company-owned locations and sometimes in a selected group of franchisee-owned units.

Meet the team.

If you like what you see in the FDD, the franchisor will want to arrange a meeting between you and their corporate team. Though it’s often called a ‘Discovery Day,’ these meetings are usually more than one day and act as a crash-course in the franchisee experience within that company. Sometimes, the franchisor will even cover all or part of your travel and lodging expenses.

Keep in mind: It’s not uncommon for aspiring business owners to attend multiple Discovery Days with different franchises while they decide which opportunity is best for them. Shop around as much as you need to feel confident when you make the final decision.

Now, you’ll make your choice.

Do any final research you need to make a decision and then pull the proverbial trigger. It might not be an easy decision – take the time to do some self-assessment and make sure you’re happy with your choice. When you get this far, you’ll deserve congratulations and a high-five but don’t pop the champagne just yet. At this point, you’ll need to create a written business plan to secure funding, which can be challenging and time-consuming in its own way depending on which financial route you choose. Once your funding is in order, you’ll be able to sign your franchise agreement.

After you sign, things will start falling into place.

Signing the agreement is the start of the real prep work that goes into business ownership. If the franchise supports brick-and-mortar locations, you’ll meet with real estate and construction teams to identify the best spot for your franchise and kick off the buildout process. This is also around the time you attend training.

The length of the training process depends on the franchisor, but you can usually expect at least two weeks of classroom-style learning mixed with hands-on training so that you’re fully equipped to operate your franchise by the time grand opening rolls around. And, since you’re the owner, you’ll be in charge of hiring your team of employees. Usually, the franchisor will assist in getting your team trained before opening day and in some cases, the franchisor will even train them at no additional cost.

Find your biggest pair of scissors.

As your grand opening gets closer, you and the franchisor will work together on an appropriate marketing strategy for your area and your budget. It’s a good idea to work with your community’s Chamber of Commerce to help plan your grand opening as a community event and to get you connected with other local entrepreneurs. Your first day as a business owner doesn’t necessarily decide how successful your franchise will be, but it’s wise to do whatever you can to start on the right foot, so be sure to make the most of marketing and PR to get the word out.

Not many feelings can beat the one you feel when you cut the ribbon on your own business. Of course, this is when the real test begins so be ready to put your nose to the grindstone – but don’t forget to enjoy this moment. Be proud of the work you did to get to this point. You’ll have earned it.

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