How to Own a Franchise: Simple Guide

ByVladana Donevski
May 10,2022
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If you want to own a business but don’t want to start from scratch and build a brand, buying a franchise is a great way to simplify the process and generate profits in the increasingly competitive world of commerce.

In this guide, we’ll walk you through 10 steps on how to own a franchise. In addition to detailing the process of investing in this business model, the following information will help you identify the right opportunities and the ideal franchises for sale.

Why Purchase a Franchise

Before you can start thinking about owning a franchise business, you need to make sure you’ve chosen the right path. Evaluating the pros and cons is the only way to make a calculated decision.

When you purchase a franchise, you’ll have to get used to a limited degree of creative control. So, if you’re hoping to develop products or add your own unique touches to an existing brand, you should probably steer clear of franchising. Franchise opportunities are spread out across a diverse group of sectors, including food and retail brands. That said, entrepreneurs looking for eCommerce opportunities may find affiliate schemes or Etsy stores more accommodating options.

Of course, the range of possibilities with franchises is endless. Here are a few key findings about the state of franchising and its impact on the economy:

  • Over 10.5% of all U.S. businesses are franchises. 
  • Franchises create an average of up to 14 jobs, and a new one is launched every 8 minutes during any given business day.
  • There are over 780,000 franchises in the US alone.
  • The franchise industry reportedly accounts for around 50% of all retail revenue in the US.
  • Some sources claim that franchises have a success rate of 90%. Even if that figure is slightly exaggerated, it easily outperforms startup ratios.

Franchise opportunities allow you to start doing business right off the bat because the branding side is already taken care of. While you’ll need to work within the existing framework of the established company, you’re mitigating the risk of failure because you’re inheriting a system and brand that have already proven themselves on the market.

How to Own a Franchise: Buying a Franchise in 10 Steps

If you’ve decided that owning a franchise is the right business move, stick to our step by step franchise guide, which will point you in the right direction while answering a few key questions:

  • How much does it cost to own a franchise?
  • What are the best franchises to own?
  • How will I know if the franchise opportunity is right for me?
  • What are the requirements for owning a franchise? 
  • How do I make my franchise a success?

One of the main benefits of buying a franchise is that you can focus on the management aspect without wasting time on the planning and concept stages. Follow these 10 simple steps, and you’ll be ready to run your franchise in style.

1. Find the Best Franchise 

First and foremost, you need to determine which franchise is right for you. Food franchises are the most common, but almost 300 industries offer franchise opportunities of some kind. Moreover, there are plenty of websites and trade events where you can find franchises for sale.

Assuming you do go for a food outlet, some of the most popular options include a McDonald’s franchise, a Dunkin’ Donuts franchise, a Krispy Kreme franchise, or a Chick-fil-A franchise. Still, it’s important to conduct in-depth research to find the best franchise opportunities on the market. Be sure to consider the following:

  • Costs: Knowing how much money you need to own a McDonald's franchise, for example, is critical when weighing your options. An existing McDonald’s franchise can cost upwards of $2 million. 
  • Opportunities: There are plenty of franchise opportunities, but the key is to pick the one that best matches your skills and budget. Also, make sure you do your homework on the competition and learn about their proximity to your locations.
  • Familiarity: You don’t have to work on a franchise you know and love, but it certainly helps. Passion and knowledge are important during those difficult early stages.
  • Reputation: The company’s track record on social responsibility and its ability to provide quality products and services will affect your reputation. 

There are other factors to consider, such as whether you plan to maintain a job alongside the franchise until launch or whether you’re partnering up with other owners. 

2. Apply 

When you’re done with your research and you’ve found the franchise that is the right fit for you, the company will want to make sure that you’re a good fit for them. Good networking skills and the ability to work collaboratively are useful qualities in these situations, which may explain why franchising is becoming increasingly popular among women entrepreneurs.   

You’ll also need to go over the Franchise Disclosure Documents or FDDs. The documents outline your responsibilities, the relevant fees, and the rules and regulations you’ll need to adhere to. The franchisors are legally obligated to provide you with this 50+ page document before any contracts are signed. The FDDs typically include the following:

  • The brand presence in your state and a three-year growth projection,
  • The investment fees and ongoing costs 
  • The support that will be offered to the franchisee

Some franchisors may not offer business performance details and information on losses or unit closures. But you can always turn to third parties and the company’s public filings for more info.

3. Attend a Discovery Day

Discovery days are an important feature that gives franchisors and franchisees an opportunity to connect and learn more about each other. It is, therefore, considered a key step towards setting the foundation for a long and successful working relationship. It’s a chance for prospective business owners to seek clarity to any questions they may have.

Before this event, you should have already completed the necessary research by reading the International Franchise Association guidelines. As a franchisee, you can expect a discovery day to include:

  • A combination of group presentations, one-on-one meetings, and interviews
  • Visits to existing franchise locations
  • The opportunity to meet important people who will guide you to success

It should be noted that some franchisors only handle the discovery day via digital channels due to the pandemic. 

4. Fund the Venture

Studies show that the costs of owning a franchise are around $250,000 for more than half of all franchise opportunities. Many prospective franchise owners will struggle to find that much capital. Thankfully, there is a range of funding options available.

Of course, you can make life a little easier by finding the cheapest franchises to start things off or by seeking external funding. Experts suggest liquid capital should account for around 30% of the total costs. Here are a few avenues to explore:

  • Securing bank loans with bad credit isn’t impossible. Still, qualifying for a franchise loan when you have poor credit history will add a few steps to the process.SBA loans are a popular option among prospective franchisees.
  • A Rollover for Business Startups or a ROBS agreement that leverages success from your 401K retirement account. 
  • Private investments from friends and family, which could include crowdfunding; however, it should be noted that you are unlikely to gain investments from strangers for a franchise.
  • Consider a partnership with another prospective franchise manager. While it does reduce your potential financial exposure, it does add some complexities. It also means you need to split the profits.

The harsh reality is that you cannot own a franchise with no money. Once you’ve researched how much buying a franchise will cost and approached lenders with a business plan, you have a fair shot at success.

5. Invest in Yourself

Studies show that almost half of all franchise owners have a bachelor’s degree. This should come as no surprise, not least because the biggest organizations want every franchise to represent the company in style. Therefore, it’s vital that you understand the qualification requirements.

Your franchisor will typically run a host of training services for you and your team. This is to ensure that you continue to manage the company within the framework of the parent company to ensure consistency with other franchises across the nation. Additional forms of self-investment that you may wish to consider are:

  • Advanced research into the history of the company,
  • Body language and communication courses,
  • Your personal grooming to make appearances count,
  • Developing a positive mindset and self-confidence.

You are only one cog in the machine, but you must not forget that you set the tone. When you lead by example, it will filter down throughout the business to deliver stunning results.

6. Register Your Business

By now, you may have already registered the company. If not, you will need to do so quickly so that you can commence with business operations. The franchise must still be incorporated like any other business, which means providing your Employer Identification Number and other details. 

One of the biggest dilemmas revolves around finding the right type of structure for your company. 

  • An LLC keeps your business as a separate entity, which reduces your liability and eliminates other legal requirements, especially when compared to corporations.
  • An S-corp tax election offers tax advantages but reduces your flexibility. 

In most cases, an LLC is the way to go. Bear in mind that you’ll also need to open a separate bank account to keep your franchise finances separate from your personal ones.

7. Find the Ideal Location

Location is one of the most important aspects when running a franchise, especially when we’re talking about food and retail brands. Finding a commercial unit that’s affordable and easily accessible to consumers is vital. Here, it’s important to think about money and your investment capabilities.

Leasing is likely to be the best option for your franchise business, although a commercial real estate loan may enable you to purchase property. While the right location is the priority, you must also consider:

  • The square footage of the internal areas and whether major structural updates or refits are required
  • Accessibility to the front door and the parking lot
  • Safety for all the areas as well as employees and guests
  • Monthly rental costs and the minimum contract duration

As well as finding the right location, you’ll need to design the layout of your franchise or store. The good news is that everything from the furniture to the equipment and POS terminals can be provided by the franchisor.

8. Hire the Perfect Team

Always seek advice and guidance from senior franchise managers and the parent company. It’s equally important to employ the right people at your franchise store.

It’s likely that your franchise will be open for long hours, especially if you want to own a fast-food franchise. Employee engagement stats show that the current rate is just 34%. As such, finding the right workers and providing the tools to help them thrive can make a huge difference to your venture. For a fast-food restaurant, you’ll need to hire:

  • Chefs 
  • Waiters
  • Cleaners 
  • Admins
  • Supervisors

Assembling the best team is one of the most important challenges you’ll face. But succeeding in this will give you peace of mind and enable you to establish a better work-life balance.

9. Prepare Your Marketing Tools

One of the great things about franchising is that your franchisor will already have logos, slogans, color schemes, posters, and deals in place. Moreover, they may provide you with a template website for the local franchise. Franchising stats show that seven of the top 10 franchises are in the food industry. If you’re in the same sector, marketing items can also cover menus and images of food items.

Over four in every five franchises focus on regional audiences. Every marketing plan should be geared towards conversions and revenue. Some of the key features to remember are:

  • Local SEO, social media marketing, and content marketing
  • Affiliate marketing and the power of recommendation
  • Flyering and using posters in prominent areas

Perhaps most importantly, you need your shop signage to stand out. Again, this is something that giants like McDonald’s and Dunkin’ Donuts will help with. 

10. Open and Operate

Once you’ve completed the steps above, you should be ready to launch the franchise. Your franchisor will provide the promotional tools for you to organize an opening event at the right time. Of course, seeking local press coverage can make all the difference.

As long as you follow the successful launch with consistent quality in daily operations while keeping one eye on future opportunities, your franchise will have every chance of success. 

Final Word 

Our guide on buying a franchise and the 10 steps we’ve outlined should give you a far better understanding of whether this is the right move for your career. The potential profits are impressive, but only if you have the right skills and can find the passion for essentially running an established branch for a parent company.

The fact that over 780,000 business owners are thriving through this model underlines its potential. And amid the current economic turmoil on the global stage, there has never been a better time to explore this lucrative option.

Frequently Asked Questions
Is owning a franchise profitable?

Owning a franchise business can be very profitable. In fact, some reports suggest that up to 90% of U.S. franchises are successful. They cumulatively contribute around $1.6 trillion to the economy. The exact earnings can vary based on various factors, including the industry. 

How much money do you need to own a franchise?

Research shows that the average franchise requires an initial outlay of $250,000, while it’s likely that you’ll need to pay a commission on your store’s profits. However, there are several affordable franchise opportunities that can cost under $10k to launch, as well as many others that sit in between the budget-friendly options and the industry averages.

Can anyone own a franchise?

Technically speaking, anyone can apply to open a franchise, but it should be noted that the national and global giants will only let suitable candidates represent their brands. During the application phase, you can expect to have your credit score, net worth, industry experience, and management experience reviewed. It’s also worth noting that most franchise owners have a bachelor's degree.

How do I start a franchise with no money?

This guide on how to own a franchise highlights the importance of financing. In short, you will need money to purchase a franchise, but it doesn’t have to be yours. Bank loans, private investments, and SBA grants are just some of the options that may be available in your state. Research is key.

How much do Chick-fil-A owners make?

While many of the biggest franchises do not publicize how much their store owners make, it is reported that the average Chick-fil-A franchise owner can expect to make $200,000 per year. However, this figure is only possible if you find the right location, choose a winning team, and operate the company in a way that maintains standards and impresses guests.

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Independent Contractor vs. Employee: 5 Main Differences
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They must also adhere to company guidelines, including all of the stipulations in the employee handbook.  Contractors, on the other hand, are independent workers who get paid for completing projects. They don’t receive any perks or benefits (besides their pay), and they are not on the company payroll. Contractors usually run their own legal business entities, such as limited liability companies. Organizations buy their services “off the shelf,” as and when they need them. If the contracting company sees fit, it can simply cancel them without having to offer any redundancy pay or advanced notice. Contractors sign contracts with businesses hiring them. These set out what the company expects, the deliverables, and how long the work will go on for. Contracts can be short-term, lasting just a few weeks, long-term, or indefinite, depending on the underlying brand’s business model. Businesses often hire contract workers because it’s cheaper than taking on full-time employees. For instance, when companies hire gig workers, they don’t have to pay health insurance, vacation time, 401(k) contributions, or any other benefits. They just pay the fee that the contractor asks for.  Independent Contractor vs. Employee Checklist In this section, we explore the differences between employees and contractors. Pay and Taxes Companies pay employees and contractors differently. As discussed, employees are on the company payroll and typically receive either a fixed monthly salary or a figure determined by their hourly rate of pay. Contractors, on the other hand, aren’t on businesses’ payroll. Instead, companies pay them in a similar way to how they might pay a vendor by making a bank transfer or sending them a check in the post.  There are also differences when it comes to taxes. Firms tax employees on behalf of the IRS by automatically deducting anything they owe from their paychecks. 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If they want any of the above perks, they must buy them themselves.  Reasons for Hiring Companies hire employees and contractors for different reasons. The main motivation for employing a worker is to gain their loyalty and leverage their skills daily, long-term. The reason for this is simple economics: It’s expensive for firms to continuously go to the market and hire the skills they need on a job-by-job basis, so bringing someone in-house cuts costs.  On the other hand, firms typically hire contractors when they require their niche expertise for a particular project. For instance, it’s common for contractors to work for firms for a couple of months and then leave once they obtain certain milestones.  Furthermore, contractors have less loyalty toward the companies they work for because they’re always on the lookout for the most lucrative projects.  Employment Flexibility Employees have a single employer (unless they have a side gig) and are subject to their employer’s rules. Contractors, on the other hand, work for many firms, either concurrently or sequentially throughout the year, depending on the type of work they do.  Of course, there are independent contractor pros and cons associated with this. On the plus side, they can take time off work whenever they like. However, if they do, they won’t get paid, which is a negative compared to a “standard” employee. Training As you might expect, there are also significant differences in training and onboarding between independent contractors and employees. Contractors, for instance, don’t get much (if any) onboarding at all. That’s because they’re not joining the company long-term. Employees, on the other hand, may receive long on-ramps that introduce them to every aspect of the business, including the culture, hoping that they will stick around for the long haul. Training is also different. Companies expect independent contractors to arrive with fully-fledged skills right off the bat, whereas they may view employees as more of a work in progress, offering professional development as a job perk.  Autonomy Lastly, there are significant differences between the level of autonomy afforded by regular employment and self-employment contracts.  Employees must perform work according to the instructions of the employer. For contractors, it’s different. Firms assign them projects, but it’s entirely up to them whether they take them on or not. Moreover, companies tend to exert less control over where and how the project is completed. Contractors, for instance, don’t have to turn up at the office at set hours or dedicate certain times of day to particular tasks. Classifying Workers The IRS looks for specific factors that indicate whether someone working for you is really an employee. Therefore, it’s critical to get the distinction right. 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If they remain for many years, the IRS may interpret that as a sign that they are actually employees.  Is the worker paid monthly? Another sign that a worker is an employee is if you pay them a set amount monthly instead of on a “per project” basis. The IRS may view such payments as being suspiciously similar to a regular salary.  Does the company pay for travel? Companies will usually pay for employee travel costs because they can deduct them from their expenses. Independent contractors, on the other hand, are usually required to pay for their own transport. If companies pay for contractor transport, the IRS might consider this evidence they are actually de facto employees.  In summary, knowing the right classification for your workers is essential. If you misclassify, you may have to pay both back taxes and fines to the IRS. 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These could include fines, jail time, and damages litigation by workers.  Employee Pros and Cons Let’s take a look at some of the positives and negatives associated with hiring an employee.  Pros of Hiring Employees Part of a team and often want to go the extra mile to advance their careers A sense of loyalty and duty toward the firm Able to perform routine tasks over long periods Can take on extra work when the need arises Cons of Hiring Employees Training and professional development can be expensive Salaries must be paid like clockwork, regardless of the business’s cash flow position Perks and other employee-related expenses can add to the cost of hiring Recruitment and interview processes can take a long time Pros and Cons of Independent Contractors Now, let’s take a look at some of the pros and cons of independent contractors:  Pros of Hiring Independent Contractors Save money overall because you’re not committed to paying any benefits or salary Easily hire the right person for the task without the need for additional training Gain greater flexibility; if a contractor isn’t a good match, there’s no need to hire them again The contractor takes care of all the permits and licenses they need; it’s not the business owner’s responsibility Cons of Hiring Independent Contractors Some loss of control over how they perform tasks Difficulty closely monitoring their work and assessing the quality of their contributions Lack of company loyalty Independent contractors own the copyrights to their work unless you write up an agreement stating otherwise Hired short-term and may require administratively costly re-hiring in the future Conclusion Essentially, the difference between an independent contractor and an employee comes down to the relationship of the worker to the firm hiring them. If they receive regular wages, follow instructions of senior managers, and work at the employer’s place of business, then they are probably an employee. However, if they work relatively independently, don’t receive benefits from the employer, and operate remotely, then they are more likely to be a contractor.  Correctly classifying workers is essential. Failing to do so properly can result in having to pay hefty back taxes and fines to the IRS. Furthermore, wrongly classified employees may litigate against you. 
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Knowledge Base
Balance Sheet vs. Income Statement - Explanation and Examples
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Some of the items that may be listed in your account include: Cash reserves Short-term investments Accounts receivable Inventories The top of this list should include a “Total Current Assets” figure. Long-Term Assets The second section should cover the long-term assets, which are low liquidity items that offer their value in a year or more. Some examples are:  Long-term investments Property and land Long-term equipment Intangible assets The top of this section should include a “Total Long-Term Assets” figure. Current Liabilities The next section will list current liabilities, which are due within the next 12 months. Examples include: Accounts payable to suppliers Accrued liabilities like employee tax withholdings Unearned revenue A “Total Current Liabilities’ figure should be added to the top of this section. Long-Term Liabilities Next up is the liabilities that are not due soon. 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By Julija A. · April 20,2022
Knowledge Base
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Choose a type of billboard and a location that suits your budget.  Billboard Rental Costs How much is a billboard? Statistics suggest that the average cost of traditional billboards ranges from $750 to $5,000 per month. Digital billboards are more expensive and usually cost in the region of $1,200 to $7,000 per month. Mobile billboards cost upward of $500 per truck per day.  The exact cost of renting a billboard will depend on several factors. Location The location is one of the most significant driving factors for billboard advertising costs. Rural areas tend to be significantly cheaper than prime spots in big cities because of the lower levels of exposure. Costs also vary according to the state. The average cost of billboard ads is higher in densely populated areas.  Here are some examples of average prices in various states:  Cedar Rapids, Iowa: Physical billboards cost $550-$4,500 per month, digital billboard advertising cost is $2,100-$3,500 per month Indianapolis, Indiana: $1,500-$5,500 per month, $3,000-$7,000 per month (digital) Orlando, Florida: $800-$4,500 per month, $1,200-$3,500 per month (digital) Phoenix, Arizona: $1,250-$4,000 per month, $3,000-$7,500 per month (digital) Boston, Massachusetts: $4,000-$13,000 per month, $2,500-$8,000 per month (digital) Los Angeles, California: $1,000-$10,000 per month, $6,000-$15,000 per month (digital) Prime slices of advertising real estate come with premium prices. On Sunset Boulevard in Los Angeles, for example, the billboard sign cost can reach $35,000 per month. In Times Square, home to the most famous billboards in the world, day rates can exceed $50,000.  Target Demographic Targeting specific demographics may increase advertising costs. If you’re looking to reach out to customers searching for luxury products, for example, you will need to target prime locations where rental costs are higher.  Duration The cost of renting a billboard will vary according to how long you want to rent the billboard for. You may decide that you want to rent a billboard for a day, a week, a month, or several months. You’ll need to consider the day or monthly rate and the term of the agreement.  Type of Billboard Digital billboard advertising cost tends to be higher than physical billboards and mobile advertising. However, this is not always the case. A digital board in a rural location, for example, will cost less than a traditional billboard in a sought-after city-center location.  Installation and Design Costs The cost of designing and installing billboards will increase the cost of your advertising campaign. Always make sure you’re aware of the total cost before you proceed.  Calculating Billboard Advertising Costs Billboard advertising costs are presented in cost per mille, a common measurement in advertising. “Mille” here stands for thousand impressions and relates to the impact of the billboard. Impressions, along with circulation and demographics, contribute to the billboard’s out-of-home rating, formulated by billboard rating bureau Geopath: 1. Circulation: The volume of traffic your billboard is exposed to. Data is collected by transport authorities. It ‘s important to note that this figure doesn’t take the number of drivers or passers-by that actually see the advert into account.  2. Demographics: The cost of a billboard reflects the target demographics. Examples of key demographics include age, gender, and average income. The higher the average income, the higher your advertising costs are likely to be.  3. Impressions: Impressions indicate the likelihood of prospective customers to see the advert. This figure is calculated based on the location of the billboard, the size, and the average speed at which people pass the board.  Pros and Cons of Billboard Ads Due to its specific advantages and disadvantages, billboard advertising is not ideal for every business. After going through this list of pros and cons, you may well come to the conclusion that other forms of marketing, for example, SMS campaigns, are better suited to your business. Pros Raise brand awareness: Introduce your brand to customers in a simple, accessible way Reach out to vast audiences Boost sales and generate leads Target specific locations and demographics to enhance the quality of leads Spread the word using short, effective, impactful messaging Target out-of-home audiences Repeat exposure for regular commuters Tailor your strategy to suit your budget Cons Short exposure time Limited capacity to provide information Can be expensive if you’re targeting prime locations Poor visibility in some locations Can be difficult to track progress and evaluate performance Who Can Benefit From Billboard Advertising? Billboard advertising is most beneficial for: Companies and organizations advertising specific stores or locations Businesses looking to raise brand awareness Businesses launching new products or stores and companies marketing time-limited promotions Companies targeting local customers Organizations with mass-market appeal Billboard Advertising Tips To maximize the chances of success, here are some useful billboard renting tips: Make your message clear and memorable. Use a font that is easy to read, make sure your billboard is aesthetically pleasing and eye-catching, and ensure that the colors stand out. Include contact information, website details, and social media handles. Choose relevant, high-quality images. Don’t overcomplicate the billboard: People need to be able to see it and understand what it’s advertising within a few seconds. Remember that less is more: Don’t fill every inch of the billboard with text or images.  Research locations. Avoid billboards that are partially hidden by obstructions, such as trees or traffic signs. Make sure the location is relevant to the target customer. Choose a site where traffic speed is relatively slow to optimize exposure.
By Vladana Donevski · April 20,2022
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