How to Own a Franchise: Simple Guide

ByVladana Donevski
May 10,2022

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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Billboards are designed to turn heads and encourage drivers or passers-by to want to find out more. Advertising statistics tell us they can be beneficial for businesses of all sizes, but whether they’ll be beneficial for your company depends mainly on the cost of billboard advertising.  The average billboard rental cost varies according to several key factors, including the location, billboard type, and the duration of the rental agreement. In this guide, we’ll explore billboard advertising, highlighting the pros and cons and discussing billboard prices in detail.  Types of Billboard There are three main types of billboards to choose from when drawing up plans for a billboard advertising campaign. These are: Traditional billboards: These are classic billboards designed for outdoor advertising. Digital billboards: A newer version of the traditional billboard, digital boards have LED displays. Mobile billboards: Examples include billboard adverts on buses and cars.  Which Type of Billboard Is Best for My Business? Some billboards are better suited to specific businesses and campaigns than others. When deciding which kind of billboard to use, it’s an excellent idea to think about these factors: The target customer or demographic: Who are you trying to target, and what is the best way to reach that customer? Freeway billboards are a fantastic option for car manufacturers and retailers that sell products for drivers, commuters, and motoring enthusiasts, for example.  The primary objective: What is the primary objective of the campaign? Are you looking to encourage customers to come and visit a store or your business premises, or are you hoping to catch the eye so that a client calls you or checks your brand out online? Your budget: Billboard rental costs vary hugely. 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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