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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Manufacturing, healthcare, automotive, and insurance are just some of the industries that are starting to sell directly to consumers online. This new approach and innovative trends in the eCommerce industry might bring some new challenges. However, the benefits are likely to outweigh the drawbacks in the long run. ECommerce Companies Lean More on Augmented Reality The rise of augmented reality has been a game changer in the eCommerce industry, especially in fashion and home furnishing. This technology is being used by some of the biggest names in retail, including IKEA, Dulux, Lego, Sephora, and Nike. AR allows shoppers to see how products would look in their homes before they buy them. This is particularly useful for items like furniture and home décor, where it can be difficult to visualize exactly how something would look in your home space. Following the new eCommerce trends, AR has recently been used to create virtual showrooms and allow customers to try on products before they buy them. This can benefit the clothing and makeup industries, where you need to see how something looks on you before you make a purchase. We expect to see even more retailers using AR in the next few years as the technology becomes more widespread and available to everyone. AI Will Further Personalize the Shopping Experience Artificial intelligence is already being used by many top-rated eCommerce platforms to personalize their customers’ shopping experiences. This is one of the latest eCommerce trends, and it helps businesses learn about customers’ individual preferences and use that information to recommend products based on a customer’s past purchases, browsing history, and search queries. This technology is also being used to create dynamic pricing models that automatically adjust prices based on demand, competitor prices, and other factors. AI can also be used to help businesses manage their inventory and fulfill orders more efficiently. In the future, AI is likely to become even more involved in the eCommerce experience. It will be used to provide customer support, process orders, and handle returns. We may even see robots being used to pick and pack orders in warehouses. The use of AI will enable eCommerce shoppers to have a more personalized and convenient experience. It will also allow businesses to save money on labor costs. Chatbots Will Become More Common Today, customers expect their online shopping experience to be streamlined, so when they encounter a bottleneck or poor customer service, it’s very easy for a potential customer to abandon their cart. This means that eCommerce businesses need to find ways to speed up their fulfillment process. One way to do this is by using chatbots to automate customer service tasks. A chatbot is a computer program that simulates human conversation. Ever since the first chatbot, ELIZA, was created in 1966, the service has been used to provide customer support, answer questions, and make recommendations. Many eCommerce businesses are already using chatbots, and we expect future trends in eCommerce to make them even more common.  For example, a chatbot can be used to answer common customer questions, provide order status updates, and take care of returns. This frees up customer service representatives to handle more complex issues.  In the future, we expect chatbots to become even more involved in the eCommerce experience. They will likely be used to handle a wider range of tasks, including processing orders and payments. As AI becomes more sophisticated, chatbots will become more realistic and able to hold natural conversations with customers more easily. Voice Search Will Become a Big Deal As voice-activated assistants like Amazon Alexa and Google Home become more common, we expect voice search to become more prominent in global eCommerce trends. Voice search allows for voice input, which is faster and often more convenient than typing. As statistics indicate, about 75% of US households will own at least one smart speaker by 2025, making voice search an important factor in eCommerce.  As the use of voice-activated assistants grows and as they become an integral part of eCommerce’s future, we expect businesses will optimize their eCommerce sites for voice search. This means using natural language instead of keywords, including long-tail keywords that are more likely to be spoken than typed, and making sure that product pages are listed when someone searches for relevant keywords. It will also become more critical for businesses to provide concise and accurate information on their product pages. This is because people are more likely to get frustrated with a voice-activated assistant if they have to keep asking for clarification on product descriptions. Conventional Payment Options Will Take a Back Seat As the world becomes more digital, we expect to see a shift from traditional payment methods to newer, more secure methods such as mobile payments and cryptocurrencies. Unlike recent B2B eCommerce trends, this one will have a more profound and lasting impact on the way businesses interact with customers.  With a variety of ways to pay for goods and services online, customers will have more choice and flexibility when it comes to how they make purchases. We expect mobile payments to become more popular as people become more comfortable using their smartphones to make transactions. Contactless payments have become common during the pandemic, and established players such as Apple Pay, Google Pay, and Samsung Pay are likely to benefit from this trend. Cryptocurrency is another payment method that is gaining popularity, particularly among younger generations. Bitcoin payments, one of the major new trends in eCommerce shopping, have been on the rise lately. As more people become aware of cryptocurrency and how to use it, eCommerce customers will have more options when it comes to how they make payments. Headless and API-Driven Commerce is Gaining Momentum Headless commerce is an architecture that decouples the back-end systems from the front-end. This allows businesses to build their eCommerce store using any programming language and framework they want. API-driven commerce is a similar concept, but it takes things one step further by allowing businesses to connect their eCommerce store to any third-party service using APIs, a type of software that allows two applications to communicate with each other. This eCommerce industry trend is gaining momentum because it gives businesses more flexibility and control over their stores. Companies can also get the advantage of the incorporated SEO, content marketing tools, and digital experience features. Finally, back-end developers and front-end developers can work independently of each other, which speeds up the development process. Product Videos Will Become More Popular As broadband speeds continue to increase and more people watch videos on their smartphones, customer engagement through product videos will continue to grow. Short video content is a great way to show off your products in a way that is more engaging than traditional product photos. They are also a great way to showcase how your products can be used in real-world scenarios directly from your eCommerce store. Unlike photos or descriptions, video content can quickly grab a viewer’s attention and give them an idea of what your product is all about. If you want to stay ahead of the curve, you need to start thinking about how you can use video content to showcase your products or services effectively. Conversion Strategies Will Focus on Building Trust In order to convert leads into customers, businesses need to focus on building trust. Multi-channel selling, Facebook advertising, and Instagram marketing are great ways to convert leads into customers, provided you focus on building trust with your target audience.  As recent online sales trends indicate, consumers are more and more skeptical of advertising and are looking for brands they can have confidence in. This can be achieved in a number of ways, such as by displaying customer testimonials and reviews, social proof, and security seals. Another way to build trust is to offer a money-back guarantee or free shipping. This shows that you are confident in your product and that you are willing to stand behind it. Finally, focusing on transparency (e.g., disclosing your business practices, the manufacturing process, etc.) and building a strong social media presence can also help any business in the eCommerce industry build trust with potential customers. Big Data is a Game Changer Big data is a term used to describe the large volume of data that businesses now have access to. This data can come from a variety of sources, such as social media, website analytics, CRM systems, and more. Big data can be used to improve the customer experience in a number of ways, such as by personalizing the experience, identifying customer pain points, and improving customer service. We've all experienced seeing suggestions on shopping platforms or search engines, and most of us have found them to be pretty accurate. The more data a company has, the better it can cater to its customer's needs, and this will become increasingly important in future eCommerce trends. However, big data carries big challenges as customers are more and more concerned about data privacy. So, businesses need to make sure they are handling customer data responsibly and transparently if they want to keep using it to boost profits. Mobile Commerce Will Continue To Grow Mobile commerce is expected to continue growing in the coming years. According to statistics, mobile devices are used for over 40% of online transactions, their rising popularity indicates that this is one of the trends in online shopping that’s here to stay. Mobile commerce offers a number of advantages for businesses, such as increased reach, shorter buying cycles, and improved conversion rates. It also offers many advantages for customers, including the ability to shop anywhere at any time. If you want to stay ahead of the competition, it’s important to make sure your eCommerce platform is mobile-friendly. This means having a responsive design that looks good on all devices, as well as providing a smooth and easy-to-use mobile shopping experience. Omnichannel Selling Will Become the Norm Omnichannel selling is a term used to describe the practice of selling products through multiple channels, such as brick-and-mortar stores, online stores, mobile apps, and more. This eCommerce trend and approach allows businesses to reach more potential customers and provides a more seamless shopping experience. In the past, businesses have often treated each selling channel as a separate entity. However, this is changing as more and more businesses are adopting an omnichannel approach. This shift is driven by the increasing popularity of online shopping and the need for businesses to provide a more cohesive customer experience. As omnichannel selling becomes more common, it’s important for businesses to make sure they’re building eCommerce websites that can support it. This means having a platform that is integrated with all of your other selling channels and that provides a consistent experience for customers regardless of how they shop.  Environmental Sustainability Will Play a Big Role As we become more and more aware of the impact our consumption has on the environment, sustainability is becoming an important factor in purchasing decisions. Customers that follow new online shopping trends want to know if the products they’re buying have been ethically sourced and if the company they are buying from is taking steps to reduce its carbon footprint. In order to stay ahead of the competition, businesses need to make sure they’re considering environmental sustainability in all aspects of their operations. This includes everything from the sourcing of materials to the packaging and shipping of products. Customers are now more willing to pay extra for sustainable products, so there is a big opportunity for businesses that are able to meet this demand. How To Make the Best Use of ECommerce Trends ECommerce is constantly evolving, and it can be difficult to keep up. However, by staying informed and making sure your eCommerce platform is up to date, you can ensure that your business is able to stay ahead of the competition. To make the most of the latest eCommerce developments, consider the following: 1. Keep Up With the Latest Trends To stay on top of your game, you must be proactive and regularly seek out new information. There is a number of ways to do this, such as reading industry news, following relevant blogs and industry influencers, and attending eCommerce conferences. You can get to know what’s going on in the industry and find inspiration for your own business.  Read up on the research data and statistics that are available on eCommerce growth trends. This can help you understand the current landscape and make informed decisions about where to focus your efforts.  2. Take Advantage of Digital Tools There are a number of digital tools that can help you improve your eCommerce business. From marketing automation software to customer relationship management systems, there’s a variety of features that can make it easier to run your business and provide a better experience for your customers. Check the data and sales figures, and invest in analytical tools so you can understand where your customers are coming from and what they are looking for. 3. Learn From Your Competitors It’s important to keep an eye on your competitors to see what they are doing and how they are reacting to the latest eCommerce retail trends. You can learn a lot from observing their strategies and understanding their strengths and weaknesses. Should they fail, you can learn from their mistakes. If they succeed, you can try to replicate their success. Final Words As the global eCommerce ecosystem continues to grow and evolve, it's important to stay on top of the latest trends. Instead of leaning on traditional shopping methods, more and more consumers are turning to the internet to purchase items. Mobile phones play a big role here, as they provide a convenient way to shop on the go. What's more, consumers are getting more comfortable with new technologies such as AI, AR, chatbots, and voice search. These eCommerce trends in technology are changing the way we interact with eCommerce platforms and retailers. With all that said, we're confident that you now have a solid understanding of the current eCommerce landscape. Just remember to keep your eyes peeled for new trends so you can stay ahead of the curve.
By Danica Djokic · September 15,2022

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