How to Start a Franchise in 10 Steps #StartFranchise
Table of Contents
- What Is a Franchise?
- Pros and Cons of Franchise
- Types of Franchises for Franchisees to Try
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How to Start a Franchise: 10 Detailed Steps
- Step 1: Understand the Franchise Model
- Step 2: Research Franchise Opportunities Thoroughly
- Step 3: Evaluate the Franchisor’s Reputation and Track Record
- Step 4: Speak With Current and Former Franchisees
- Step 5: Review the Franchise Disclosure Document (FDD)
- Step 6: Calculate Total Costs and Financial Needs
- Step 7: Analyze Market and Location Potential
- Step 8: Secure Financing if Necessary
- Step 9: Complete Training and Operational Setup
- Step 10: Launch Your Franchise and Focus on Growth
StartFranchise.id - Franchise has become one of the most popular model businesses in the world and has been considered to be a smart move for those joining the business. Franchise can give the opportunity of “fast-tracking” the businessperson’s revenue as they do not need to build a brand from scratch and can use an existing and proven brand in the world.
Franchise can also be a way for a business to expand their reach and revenue by opening opportunities for people to join the business and make the brand bigger together. But, starting a franchise could still be a large question to ponder by these entrepreneurs, especially how to start a franchise successfully.
This article will explore lightly on what is a franchise along with its pros and cons, and will explore more deeply on the ten steps needed to start a franchise successfully.
What Is a Franchise?
A franchise is a business model where the franchisor, the owner of the original brand, gives the permission of another businessperson, or also known as the franchisee in the franchising world, to run a business under the franchisor brand. The franchisee gains access to the franchisor’s name, operating systems, training, and marketing support. In return, the franchisee invests capital and pays both an initial fee and ongoing royalties.
This setup balances independence with guidance. Franchisees as the owner of the outlet but they still need to follow the franchisor’s standards to keep the business consistent across all locations.
Pros and Cons of Franchise
As every business model exists in this world, franchise business model also has its own pros and cons that could be an advantage for franchisees and something to take warning of while operating the franchise.
Pros of Franchise
Brand recognition : Usually, the brand who is already famous would be the one to open a franchise, which would give the advantage to franchisees as they do not need to build the brand again from scratch and already have loyal customers of the brand.
Tested business system : Franchisees do not need to trial and error inside the operational a of the brand as the franchisor will give them the recipe for success with their business system
Training and support : Franchisors will also provide both training and support for the franchisee to ensure both success for franchisees and franchisors and also to maintain the quality of the franchise.
Shared marketing power : Franchisees do not need to trial and error for marketing as they will also be affected by the franchisors’ marketing for their main brand. Usually franchisors will also help in marketing for the specific outlet to help the franchise outlet start
Cons of Franchise
High initial cost : Unlike startup, franchise has a higher initial cost in purchasing the license and other fees to start the business.
Less freedom of your business : While franchisees are the owner of the outlet, they would have limited freedom in innovating their business as franchisees need to follow the franchisor’s set of rules.
Dependence on other people : Franchise will always depend on the other people, meaning that their action or consequences can impact your own franchise. One point, the brand is closely related or dependent on the franchisor, so the franchisor action could greatly impact the whole franchise, including each and every franchisee could be affected. Not only franchisor, but other franchisees could also impact the other franchisee as the brand is the one that will be impacted the most.
Types of Franchises for Franchisees to Try
In learning how to start a franchise, it is important for future franchisees to also know what type of franchises that are available for them, so they can choose which one is the best interest with their vision and background to ensure more profit. The most common types of franchises that could be seen by franchisees are :
Health & Fitness : Global gym chains like Anytime Fitness and Gold’s Gym can be an interest for franchisees who are in the gym culture.
Food & Beverages : The F&B Business varies not just from fast food such as KFC and Subway, but also dessert shops like Häagen-Dazs and Cold Stone Creamery can be an opportunity for franchisees.
Education & Childcare : Learning centers like Kumon or Primrose Schools give parents trusted options and franchisees an alternative business helping the others.
Retail & Lifestyle : Franchises like Miniso or Lush Cosmetics show how beauty and lifestyle brands can scale.
Business & Services : Logistics hubs like UPS to cleaning services like Jani-King could be a niche way for franchisees to tackle new opportunity in business
Hospitality : Global hotel brands such as Hilton or Marriott run mostly on the franchise system.
How to Start a Franchise: 10 Detailed Steps
After knowing what a franchise is, the pros and cons of it and the types, franchisees can be considered ready to open one themselves. To help franchisees, here are the ten detailed steps franchisees can follow to start their own franchise.
Step 1: Understand the Franchise Model
Alongside with the information from this article, franchisees also need to educate themselves on how franchising works, including roles, royalty structures, and operational obligations. A solid understanding of franchise will massively prevent misconceptions.
Step 2: Research Franchise Opportunities Thoroughly
Franchisees can explore the industries that match with their interests. Franchisees can attend franchise expos, use online directories, study top-performing brands, and use media partner franchises such as Start Franchise to do the research. Compare costs, reputation, and growth potential is also crucial in starting a franchise.
Step 3: Evaluate the Franchisor’s Reputation and Track Record
Franchisees must investigate the brand’s history, outlet performance, training quality, and legal background. Transparency and stability are key indicators of a reliable franchisor, in reverse with those who hide their reputation and track record.
Step 4: Speak With Current and Former Franchisees
Franchisees can gain real-world insights about support quality, daily operations, and financial performance from current or former franchisees. Speaking with current or former franchisees can also reveal hidden challenges that could be obtained from actually doing the business.
Step 5: Review the Franchise Disclosure Document (FDD)
This legal contract covers fees, royalties, territory rights, renewal options, and restrictions. Franchisees can consult a franchise attorney first to ensure full understanding before signing.
Step 6: Calculate Total Costs and Financial Needs
Franchisees also need to factor in franchise fees, setup costs, equipment, licensing, marketing, and at least 6–12 months of working capital before signing the deal of the franchise. Underestimating costs is a major cause of failure.
Step 7: Analyze Market and Location Potential
Franchisees need to research the demographics, competition, and consumer behavior of the customer from the franchisor's brand. Even strong brands can fail in poor locations, so validate the franchisor’s recommended sites before opening.
Step 8: Secure Financing if Necessary
Franchisees can explore loans, franchisor financing, or investor partnerships to make a deal for the franchise. Franchises are often considered lower-risk than startups, making it easier to secure funds.
Step 9: Complete Training and Operational Setup
Franchisees must attend the franchisor training to learn systems, customer service, and management processes as it is also the privilege given for franchisees joining the franchise. Franchisees can set up their outlet, hire staff, and align with operational standards for everyday practice.
Step 10: Launch Your Franchise and Focus on Growth
Franchisees can open their outlet with franchisor support. After launch, franchisees need to prioritize operational consistency, customer service, and financial management. Many franchisees expand into multi-unit ownership over time.
Learning how to start a franchise requires a lot of steps also with understanding of the business model itself to achieve success in starting the franchise. By also weighing in the pros and cons of franchise model business, future franchisees can also prepare themselves more in starting a franchise. If franchisees are still confused or interested in joining a franchise, check out the article from Start Franchise that talks about franchise more technically and the opportunity available in the franchising world.
