How to Start a Franchise Business and Grow It
Americans have traditionally dreamed of owning their own businesses. Vistaprint carried out research in 2018 that showed that 62% of people in the US want to become business owners. Yet, current figures reveal that only about 30 million Americans own a business, which is only about 10% of the population.
These numbers tell us that there are millions of people who want to improve their lives by starting their own businesses. Some may be seriously looking for fresh opportunities while others simply hope to stumble across something that suits them.
Franchising is one way of filling this gap and helping potential business owners to find what they are after more easily. There is no need to rack your brains for a revolutionary business idea or become an expert in cutting-edge technology. You are simply using an idea that has been successful in the past and then working to make it profitable for you too.
Franchising has been around since at least the 19th century, with the Singer Sewing Machine Company and Coca-Cola among the earliest big brands to discover the benefits of using this model to grow and expand.
These days, many companies in numerous, diverse industries sell franchise rights as a way of increasing the reach of their brand and generating more income.
The 1950s and 60s saw an explosion in this way of setting up new businesses, as huge fast-food chains like McDonald’s, Burger King, and KFC all used the franchising method to expand more quickly than would otherwise have been possible. These days it is a massive industry where successful brands and potential entrepreneurs come together to create new businesses.
For business owners, this method means that you can skip past the trial and error stage where so many new business ideas get stuck. You don’t need to spend months or years thinking of new business ideas and then trying them out. Even an idea that sounds fantastic might not work so well in a real-life setting, but an existing franchise has already been tried and has worked for others before you.
If you are one of the millions of Americans who dream of taking control of their lives, this is a way of doing so that is worth investigating.
So, how do you get started? And how can you grow your business once it is up and running?
Look at the Market and Types of Franchises
The franchise market in the US is huge and highly varied. No matter what kind of business you are interested in starting, you are almost certain to find an idea that suits you.
The following are some of the most popular types of franchises:
Gyms and Fitness Centers
One in five Americans had a gym membership in 2019, and this is an industry that was worth $37.46 billion in 2019.
The types of gyms can be divided into the likes of big box gyms, boutique gyms, and personal fitness studios.
Each kind of fitness franchise is particularly appealing to a certain demographic of the population. For instance, if you are looking at opening a fitness business in a central location with an extremely high footfall then you might consider the big-box model, while boutique gyms can be located pretty much anywhere and offer a more personalized approach.
The 2019-2020 National Pet Owners Survey revealed that over two-thirds of American households have a pet, meaning that there are around 85 million families taking care of pets.
This was a significant rise in ownership rates from just a few years before. We also spend a lot more on our pets now, with a record $99 billion spent on pets in the US in 2020.
This makes pet services a popular type of franchise right now. These businesses can offer pet grooming services, premium foods and treats, or general pet supplies.
This is another broad area that covers a variety of types of businesses, from domestic cleaning services to plumbing repairs, floor installation, repairs, and everything else involved in keeping our homes looking good.
The home services sector is expected to grow from $105.5 billion in 2018 to more than $219 billion by 2026.
Some of the trends that affect this industry right now include the move towards home working, the effect of social media influencers, and the vibrant housing market in certain parts of the country.
These franchises are often among the least expensive to start and to run, with relatively little equipment needed and normally no premises required.
Fast Food Outlets
You are probably already aware that some of the biggest names in the fast-food industry are operated on a franchise basis.
These world-famous brands require a huge level of investment from new franchisees looking to get started, but there are more affordable options out there too.
Fast food chains grew impressively in the 12 months preceding March 2021, claiming almost 83% of the overall restaurant traffic in during a time in which the COVID-19 pandemic had a major effect on our habits.
The total US fast food market in 2021 is listed as being worth $278.6 billion and there are franchise opportunities in everything from smoothies to burgers, pizzas, and ice cream, just to name a few.
Cleaning and Janitorial Services
Rather than the domestic cleaning services that we saw in the home services sector, these are commercial services for businesses.
This is another area that has shown high levels of growth in recent years, with a predicted 5.8% increase between 2015 and 2022 converting it into an industry that is worth over $50 billion.
Health and Beauty
This sector covers the likes of nail salons, skin treatments, and haircare.
The global beauty industry generates around $511 billion in annual revenue and millions of Americans are looking for new services, products, and treatments, with the US making up almost a quarter of the worldwide total.
The presence of high-profile influencers and brand ambassadors has helped raise the profile of this sector even further and it is expected to show strong levels of growth in the next few years.
These are just a few of the main sectors you will come across when looking for franchise opportunities in the US. Don’t restrict yourself to just one area, as it makes more sense to carry out a full study of the market and the opportunities that exist before you make any big decisions.
Each type of franchise is unique and needs to be carefully considered. Just because you aren’t an expert in a certain type of business doesn’t mean that you can’t open a franchise in it. Many top-performing franchisees are people who opened their businesses with little or no relevant experience.
The key at this stage of the process is in keeping an open mind and letting your research guide you. The best franchise idea may be something that you would never have imagined doing before. Yet, the franchise model guides you through the process of setting up and growing in such a way that it feels natural and right.
Consider the Type of Business That Suits You
Some of the businesses we have looked at require you to have a professional qualification or a degree of experience in a certain area. Others simply have to align with your skills and interests, or else simply be the right opportunity at the right time.
If you are planning to employ staff to carry out the daily tasks, you might consider the actual day-to-day work to be less important than the other areas we will look at, such as the financial matters and the overall market conditions.
On the other hand, if you are going to be doing the work, it needs to be something you are comfortable with and can do to the required standard.
When looking at how to start a franchise business, there are three different ways of running it.
Therefore, considering which of these approaches is right for you has to be one of the very first steps.
If you want to be an absentee franchise owner, you will need to hire a manager to run things on your behalf. This can be an excellent way to earn income without dedicating your own time to it. However, this will require more of a financial investment and you will lose an element of control unless you have good processes in place. You also need a business that is suitable for this type of management approach.
If you plan to work full-time or part-time, you will probably want to find a franchise that appeals more to you personally and that better suits your skills. Maybe you love the idea of working with animals or in a gym, or you have always wanted a chance to operate a restaurant.
There is no right or wrong answer here that suits everyone. Choose the right type of business for your needs and you will increase the chances of it being a success.
Weigh the Pros and Cons
Every type of business has a series of pros and cons associated with it. By looking at these different factors, we can get a clear idea of which one is going to be best for you. The following list isn’t exhaustive, but it lets us see some of the key factors that could tip your decision in one direction or the other.
The cost. As we have seen, industries like fast food often have a high franchising cost while home services are on the lower end of the spectrum.
In terms of premises, equipment, and staff, a large gym is going to be a lot more expensive than a small-scale pet grooming service or nail salon.
To fully understand the pros and cons in this respect, you need to consider all of the startup and ongoing costs needed. If you have a limited budget to start with, you can search for low-cost franchise ideas, first of all, to narrow down your options more quickly.
Flexibility. Some of these franchise ideas are perfect for achieving a more flexible lifestyle. For example, you may be able to visit clients in their homes at convenient times and build the work around other aspects of your life.
On the other hand, some other kinds of business might see you having to work long hours in an office or store. How important flexibility is for you comes down to your personal style and the kind of work-life balance you are after.
A chance to work from home. One of the best examples of the flexibility we just mentioned is a home-based franchise. This gives you savings in terms of the cost of commuting, rent, and other overhead costs.
It also means that you can enjoy some of the extra benefits that home working provides. Forget about the grind of the daily commute, spend more time with family, and possibly even reach a healthier, more balanced, lifestyle.
It isn’t right for all of us, but if you like the idea of working from home then you could concentrate on franchises that don’t need a physical location or shop for customers to visit.
The profit potential. Not every type of business has the same potential for bringing you in profits. You would expect any idea that has been converted into a franchise opportunity to have solid money-making potential at the heart of it. However, if you want to focus on the biggest earning possibilities you need to look at the facts and figures.
It isn’t always the case that the most expensive franchise or the biggest brand has the largest earning potential, as this is calculated by taking into account many other variables. Some sources suggest that the average franchisee earns between $75,000 and $125,000 each year, but this figure varies widely between businesses.
To learn more about the earnings potential for a specific franchise, consult the Franchise Disclosure Document.
Possible growth. It isn’t just about the money you could make right now from owning a franchise. You also need to consider how the sector could grow in the near future.
A look at the latest trends and surveys will help you to decide which type of business has the best outlook in the next few years or longer.
The success rate. In general terms, the success rate for new small businesses in the US is modest. When taking into account all kinds of companies, we see that a fifth fail in the first year and a half by the fifth year.
If you start a franchise business, does this increase your chances of success?
If you choose the franchise wisely it should, as you get support as well as the backing of a strong brand. Learn more about the franchisor’s support system and franchisee success rate by reaching out to current and former franchisees.
Location. Finding the business idea that you have been dreaming of and also finding your perfect location might seem like asking for too much. Yet, you might find a franchise that is exactly right for the place you have in mind.
On the other hand, even a great business idea is likely to fail if it is implemented in the wrong location. It’s important to have a good grasp of your specific market, something your franchisor can likely help you with.
Think about the Training and Support You Need
The best franchises place as much emphasis on the training and support you receive as on the financial aspect of the business. Of course, they want all of their franchisees to succeed and make the brand even stronger, so it is in their interests to help you get off to the strongest possible start.
The training that is needed varies widely from one industry to the next, and will also depend upon your own experience and existing skills. Are you a natural salesperson or do you prefer technical tasks? Are you good with clients, or do you feel more comfortable dealing with numbers?
Specific needs for advertising, marketing, administrative, or technical support will vary from franchise to franchise, as will the levels of support offered.
You may prefer to go it alone as much as possible and choose a franchise that gives you the highest level of independence. Or, you might decide to opt for a brand that promises to give you their full backing as you try and make a success of your venture. Consider which of these approaches fits in best with your goals before you proceed.
Up to a month of training is typically needed when opening a new franchise. However, in more complex industries this could run into months or even years after you have opened. Regardless of the initial training offered, you should be sure that the company will give you ongoing support.
Research the Market
We have seen that there are numerous types of franchises available, which means that you can take your pick but how will you know which one to choose? You might be tempted to simply choose a business that you already like or a particularly powerful brand name. Yet, by doing this you could be ignoring important factors in the market that influence your chances of success.
Analyzing the market is a must when you are looking at how to start a franchise business. Doing this will provide you with valuable information, such as:
Which types of businesses have been performing well and have high growth potential?
We looked earlier at some of the most interesting trends and growth areas, which may get you started on narrowing down your franchise options.
The next step is to carry out some research of your own and see if you can fill in the blanks to understand one or two areas more fully before proceeding. Is there a type of business that you or your friends have been talking about enthusiastically recently, or that you have noticed is becoming more popular?
Is there a type of business that is under-represented in your area, compared to others where the market appears to be saturated?
Even major industries like fast-food restaurants and gyms aren’t always as fully represented in every area as they could be. Can you identify some sort of gap in the market that you can take advantage of?
There may already be businesses of the type you are looking at, but are there enough of them to satisfy demand? You can often see gaps in the market just from your personal experience of noticing large queues or hearing people complain about not having enough options.
A look on social media may also be useful in telling what local residents are complaining about or asking for right now. Getting the timing right is crucial in this aspect.
Are there emerging trends that you think you can capitalize on?
If we look at the last couple of years, the one huge factor that has disrupted just about every industry is the COVID-19 pandemic. A lot of businesses have had to close or scale back in sectors such as fitness and entertainment.
This study shows that restaurants are among the top five types of business at most risk of default due to the pandemic. Yet, the demand for these services is still there, so could it be the moment to move in?
Equally, trends like the growth of internet influencers and the use of cutting-edge technology could make one industry more attractive to you than others.
Do the demographics in your local market point towards certain businesses more than others?
If local residents are generally wealthy but time-poor due to busy lifestyles, there might be good levels of demand for services that make their lives easier.
Look at factors like the average income level, age groups, and family sizes. By understanding the people in your area, you’ll be better equipped to provide goods and services they actually want and need.
Do you have any strong rival brands to compete with?
Let’s say that you are interested in opening a pest control service and you see that there are already three or four of the biggest names in the industry working in the area. Is the market big enough or varied for you to fit in too? Or do you offer something different that could help you get a share of the market?
Maybe you already know that your new business would be faster or cheaper than the established rivals. Remember that opening a franchise rather than a completely new business can be an advantage in this situation, as your brand name is already well-known and homeowners are likely to view you as an established name from the beginning.
Does your chosen area have an employment market with the right skills, as well as access to the kinds of property and equipment you need?
If you need employees, you will need to be sure that you can get hold of them for the right price. If we look at the example of gym worker salaries, the US average is $32,657 in 2021 but it is higher than this in cities like San Francisco, CA ($38,961), Washington, DC $38,460), and Green River, WY ($37,376).
The same goes for commercial property prices, which can vary widely across the country. Will you find it easy to get hold of the equipment you need? You don’t want to leave any of these issues to chance and risk getting a nasty surprise.
Have previous franchises failed in the area, and if so can you find out the reasons behind this?
This point may be more difficult to investigate than the others. But you can ask friends or family if they remember any big businesses that opened and closed here. That gives you a starting point for researching to see if you can find out any more information on why it didn’t work.
Don’t forget that cities and markets change, so what didn’t work in the past might be a perfect business idea right now.
We saw in a previous section that pet ownership has been growing in the US and that more people are improving their homes too. Trends like this are terrific indicators of the areas you might like to focus on, although they don’t necessarily guarantee future success.
The more research you carry out the better. This means that you don’t want to rush into a decision too soon. Yet, you don’t want to let the moment pass and allow someone else to set up the type of business you want before you do. Therefore, it is about finding the right balance that allows you to proceed confidently but without taking too big a step into the unknown when you do so.
If you start doing research without having a clear idea of the industry or area for your franchise, then it is going to take a lot more time.
You can use Franchise123 to help you more easily identify what is important to you and narrow down your options accordingly.
Consider the COVID-19 Situation
There is no doubt that the COVID-19 pandemic has deeply affected most types of business in the last couple of years. However, it is worth remembering that the impact hasn’t been the same in every case.
For example, in the case of the fitness industry, many American gyms were forced to close permanently after the toughest period of restrictions. Yet, the latest studies suggest that this has led to a high level of pent-up demand, as people are keen to get back to the gym.
As the fitness industry had been going through a period of sustained growth before this, it is possible that we will soon see it growing again. Indeed, by May 2021, gym traffic had reached 83% of January 2020 levels.
Other industries have benefited from the way that Americans have been spending more time at home and have become more aware of the importance of good sanitation since the pandemic began. The likes of home improvement companies, pest control, and home cleaning services have all benefited in some way from the changes to our lifestyles.
Costs Involved and Franchise Requirements
Starting a new business is going to involve expenses no matter how you do it. Franchising is one of the more cost-effective approaches, but there are still certain costs to take into account.
The Franchise Fee
This is the amount you pay to the franchise owner for the right to use their brand name and franchise system. It is typically paid in the form of a one-off fee and varies from just a few thousand dollars to hundreds of thousands of dollars. A bigger fee doesn’t guarantee you success, but it may mean that you are joining a brand with a stronger reputation. With a lower franchise fee, you might be getting in at the right time in a growing industry or something that has slipped under the radar of other franchisees until now.
The Minimum Investment Required
This is a figure that the franchise owner requires you to start up a business using their name. The reason for this is that they have seen through their experience how much is needed to make a business in their industry a success and don’t want newcomers to fail due to a lack of initial investment. If you don’t have these assets, it is almost certain that you will struggle at some point.
The Equipment and Machinery
Depending upon the industry you want to move into, you may need to purchase or lease equipment. A good example, in this case, is with gyms, where a good variety of exercise equipment is needed before you can open your doors. The franchisor may help you obtain better wholesale prices on what you need, but it is still going to be one of the major expenses in some businesses.
The Cost of Premises
One of the other major costs in some franchises, the right premises can be crucial to the success of the business. In some other types of franchises, no business premises are needed. Compare the needs of a fast-food restaurant to that of a pest control business. It is clear that this makes a massive difference to the financial aspect of running any business, so you should be clear on the requirements from the very beginning.
This is another area that varies significantly among franchises. In some cases, you may work alone while in others, you may need a large group of employees to make it work. It also ties in with your own plans for working alone, running a team, or being an absentee franchise owner.
The products that you need or sell also need to be taken into account. Buying in bulk will help you obtain the best prices in most industries, but you should be careful not to underestimate the cost of building up your inventory. In some types of franchises, you can start off with very little inventory, while others will require a large initial investment before you can open for business.
Insurance, Taxes, Licenses, and Other Costs
It is vital that you take the time to drill down to the details in terms of any additional costs that are required. If you need to pay extra for things like insurance and taxes, this is going to make a substantial difference to your financial situation.
Royalties or other Ongoing Fees
You will almost certainly have some ongoing fees to pay to the franchisor, for the use of their brand name and services. This is often a modest percentage of the revenue that you generate but may also be a fixed monthly figure. You should also check if you will be required to pay ongoing fees for marketing campaigns or any other common costs across the brand.
Create a Business Plan
The creation of a business plan is an essential step for any new business. This is where you lay out your ideas and show how you plan to make a profit. Without a business plan, you can’t be sure that you have thought of everything needed to make this idea a success. 70% of business owners recommend creating a business plan before you get started.
Some business owners hire someone to write this for them, but it isn’t really necessary these days. All the information you need to do this can be found online, including templates where you only have to fill in your own details to complete the business plan.
A business plan is definitely going to be needed if you want to access financing for your idea from a bank or other type of lender. This means that you might not think about creating one if you don’t need to borrow cash.
However, it isn’t just a box-ticking exercise that you carry out for other people’s benefit. When you produce a good business plan, you also help to make the project clearer in your own head. You will be forced to address the main issues and put down in words exactly why you think this idea is going to work.
No matter what type of business you want to start, this is a way of looking at the obstacles, the opportunities, and the financial side of things. The good news is that there are plenty of resources online that you can use to create this plan. You can even choose from different formats and styles, depending upon how detailed and formal you want it to be.
If you aren’t going to present it to a lender, you might like to show it to a friend with business experience. This will allow them to point out any areas where they feel that you have been too optimistic or have missed anything out. One of the biggest business plan errors is that of being overly optimistic about future earnings. You need to try and be as realistic as possible about what you can expect to earn.
Another option is to approach a small business advisor or consultant and show them what you are planning to do. They will advise you on matters such as financial aspects, marketing, and legal issues. The bigger your investment, the more likely it is that you feel the need to get some third-party experts to look over your plans on your behalf, although you may also feel comfortable going with the franchisor’s own advice and support.
A Step by Step Guide to Writing a Business Plan
To start any business plan, you need an executive summary. This is a short, concise outline of what you want to achieve with the business. It is a high-level overview that lets someone see at a glance what your plans are and how you expect to turn them into reality.
Completing this section is a great way of putting your thoughts down into something short and straight to the point.
It is then time to move onto the following sections:
Details of the company. In this part of the business plan, you explain what your company is going to offer and what is unique about it. Let the readers understand why you are so confident that this idea is going to lead to success. As part of a franchised brand, this should be relatively easy to do.
An analysis of the market. You can then look at the main competitors and what their strengths are. What trends are you hoping to capitalize on and how are you going to improve on what others are already doing?
Management team and structure. Who is going to bring this project to life and what experience do they have that shows they are the best people for the job? For bigger projects with a large management team, you might need to include an organizational chart with details of the key members of the team.
What you offer. It is now the turn of the products or services that you are going to offer. This is typically easier for a franchise than for other types of business, as it is already clear what the business is going to offer.
Marketing and sales. In this section, you need to explain how you are going to attract potential clients and convert them into paying customers. Again, by using the franchise model you have an easier task here. You will probably use the brand’s marketing approach and the strength of the brand to attract new customers.
Funding needs. You only need to include this section if you are looking to borrow money, as this is where you let the bank or other lender know how much you want to borrow and what it will be used for. Be as detailed and specific as you can about how you will use the money and how you plan to pay it back.
Sort Out Your Financing
We have mentioned the cost of opening a new franchise a few times, and by now it should be clear how much you need to get started. In general terms, starting a business under a franchise scheme is more cost-effective than with a completely independent new business.
However, you are still left with the question of where to get the money from to start this venture. Since not everyone has the money lying in their account to pay for it, the following are some of the most common methods of getting hold of external finance in the franchise sector.
A Business Loan
A business loan from a bank is one of the first ways of getting money that is likely to spring to your mind. Banks tend to be quite demanding in terms of what they ask for, as they want to lower their risk of losing their money as much as possible. If you have an existing relationship with a bank, this can be helpful in getting your proposal agreed upon.
Government-Backed SBA Loans
These loans are among the most favorable for new business owners, as they offer a lower interest rate and better terms than you would expect to be offered from a bank in general. You can start the application process by approaching one of the approved banks or alternative lenders who are able to offer these loans.
Friends and Family
Borrowing money from family members and friends is something that has to be carefully considered, as it involves the risk of damaging your personal relationships if you run into any issues when paying it back. This is why it makes sense to make the terms of any loan very clear at the start and try to try it as professionally as you would any other type of loan.
A Personal Loan
There is nothing to stop you from using the funds from a personal loan to start a new business. However, you should bear in mind that you will be held personally responsible for this type of loan if you are unable to repay it for any reason.
According to the US Small Business Administration, almost two-thirds of small businesses use credit cards as a way of meeting their funding needs. This is certainly a fast and convenient method of getting hold of the money you need. However, the interest rates are often high and if you use personal credit cards you run the risk of damaging your credit score.
For many of us, our homes are where we have the largest percentage of our assets tied up. This means that remortgaging the property provides a possible way of freeing up a large sum of cash to start a business. As with personal loans and credit cards, the main issue here is that you would be personally responsible if you were unable to repay it, putting your home at risk.
This is another option that is available to new franchisees. However, this is a solution you will want to look at carefully first of all. There are some additional regulations to take into account when you carry out a crowdfunding campaign, so it isn’t as straightforward as you might have thought to get money through the likes of Kickstarter and Indiegogo.
Also known as peer-to-peer lenders, this is an option that lets you find someone who wants to lend money for investment purposes. This can be done online and the requirements are generally less demanding than for a bank loan, meaning that you might be able to access the funds you are looking for more quickly.
These financial companies operate online rather than using branches in the way that banks do. The names might not be as familiar to you as the big banks, but since the entire process is carried out online you can look for relevant information and reviews before going ahead.
In this case, you should be able to find private lenders willing to lend what you need. This is a type of loan that can expect to sort out quite quickly, but you may have to use assets to secure the loan and the interest rate will probably be higher than on other types of borrowing we have looked at.
If you need to buy a lot of expensive equipment for a new business, equipment financing could be a good choice. This method can only be used to obtain equipment, so it is perhaps most suitable for the type of franchise where equipment costs make up a large percentage of your overall spending.
Choose a Franchise
By now, you will have narrowed down your options considerably. Whether it is due to the cost, current market conditions, or personal taste, you can now start to see which specific franchises look best for you. There is a lot of choice in the American market, so you may still have a few different brands in mind that could be right.
When you make your final decision, it isn’t just about getting the finances right. You should look to feel comfortable about being associated with this brand and be proud to offer a service that people want.
This is where you can use the services at Franchise123 to ensure that you make a good decision. You will find a range of tools that help you to research and compare the different franchise brands currently available so that you can see which one is right for you.
The factors that you take into account here will be the same ones that we looked at earlier, things like cost, location, market trends, and so on. Use the filters to look at different aspects until you reach a decision on which brand you consider the most appealing.
Look at the Current Opportunities
A good way to get started is by looking at the current franchise opportunities on Franchise123. You can get started by looking at the top franchises currently available, or else choose to narrow down your search by filtering based on industry, state, franchise fee, average revenue, and other key factors.
Once you have a list of possible franchises on your screen, you can see the following details.
The name of the franchise, when it was established, and other important facts
Details of the industry they work in and a full description of their background and services
How many locations are currently open? How many of them are in the same area you want to operate in?
Their rating for reputation, quality, customer service, and products
The minimum investment needed
The franchise fee that you would need to pay at the start
Any requirements they have in terms of your total liquid wealth, total net wealth, and credit score
Details of the ongoing royalty percentage for the franchise
A list of their main competitors, where you can click on the company to find out how their franchise offer matches up
All of this information means that you can very quickly work out which franchise opportunity is right for you. Finding the right match for your needs and ambitions is crucial, so this stage can’t be rushed through.
Take your time to look at the company’s way of working, values, and principles. You need to be on the same page as them from the very start, as otherwise, you could run into significant problems further down the line.
Do you want an ambitious, fast-growing company with a clear vision, an established brand with a solid reputation for dependability, or a franchise that puts ecological issues and sustainability at the top of their list of priorities?
We understand that finding the right match is the most important step of the process. Everything you have done until now—all of the research and thinking time that you have put into this—has been leading up to this stage. Get the right match and your chance of success is going to be much higher.
This is why the number one goal of Franchise123 is to guide you through this process and make sure that you don’t skip it or make a decision too quickly.
We also provide a range of other resources for new franchisees that we think will help you to reach the right decision.
Access to a range of informative reports. Sign up for our Franchise123 newsletter and you will receive well-researched reports into the franchise industry that help you to get to grips with the market.
Franchise Glossary and FAQ. We understand that people from all walks of life and backgrounds decide to look at taking out a franchise. Some newcomers may have relevant business experience that helps them to quickly understand the terms used, but others will come across terms they aren’t familiar with. To help you understand everything and make a fully informed decision, we have gathered the most important details in our FAQ section and glossary.
A list of the top franchises. If you know which industry you want to join but need help in choosing the exact franchise, our lists and blog posts are here to help. Read about the likes of lawn maintenance, homecare, and comfort food franchises to quickly see which big brands are leading the way in these areas.
The most profitable franchises. If you are open to different industries and just want to focus on the highest possible profit, the Most Profitable Franchises section is where to look. Here, we have filtered the brands that produce the highest annual revenues, so you can start looking at them to see if one suits you.
Once you get in touch with the franchisor, you can clear up any other issues that are on your mind. They may invite you along to an event where you can find out more details, or put you in touch with other franchisees who can tell you about their experiences.
Establishing a good working relationship with the company behind the brand is vital. You need to feel that you are going to be comfortable working for them and that they are keen to support you. If these factors are in place, it will be a lot easier to get off to a strong state and then achieve continued success.
Read and Sign the Franchise Agreement
We have reached the stage of discussing how to start a franchise business in which you should be feeling confident about choosing which one to go with.
You have carried out all of the necessary research and are now ready to choose one of the franchise options that you have discovered. The industry suits you, it is right for the area where you want to work, and the numbers stack up to make it a solid financial decision.
The franchise agreement shouldn’t hold any surprises for you if you have researched it well. However, you still need to read it fully, to make sure you understand all of the terms.
Some franchises will give you flexibility in certain areas. Having said that, you should remember that consistency is one of the most important aspects of any franchise. They want you to carry on giving the same product or service and the same image as the rest of their franchisees as this is what they regard as the path to more success.
Look for areas such as restrictions on the goods you can sell, or whether you have the obligation to buy a certain amount of products from the franchisor.
Find the Right Location
Now that you know what franchise you want to open, everything should start to fall into place. For a start, you can now get to work on finding the perfect location for your new business. You will have an idea of the area it needs to be in, but maybe you still have work to do to find the exact location.
Some types of franchises allow you to use your home as a base, with no need for physical business premises like offices or stores. The home services sector is a good example of this, as it may be possible to simply speak with clients online and then head out to do your job in a van or truck.
In other cases, you might need premises but the size can be modest and the location isn’t too important. You might just have a base that the public doesn’t need to visit or even know about.
For most other kinds of franchises, the location is often the most crucial element you need to get right. This is what allows you to get noticed and attract clients.
Put a nail salon or a new fast food restaurant in the wrong place and you will face an uphill struggle, as your clients will generally look for somewhere convenient that fits their lifestyles. On the other hand, people may seek out a boutique gym with a great reputation or a home services business that they need, regardless of whether the location is ideal for them.
Ask the following questions to find the right location for your new business.
Will you buy or lease? Leasing is less expensive and gives you more flexibility, but purchasing a property may make more sense if you plan to stay in the same location for a number of years.
What is the rental cost for the size and location you have in mind? The commercial property market varies by city and state. This list of the best US cities to invest in commercial property starts with Atlanta, Georgia, and goes all the way through to San Jose, California.
Are there rival businesses nearby that could make it difficult for you to get established and grow? With some types of business, having other similar businesses nearby can be helpful, as it means that you are located in an area where people go to look for this type of service or product.
Will you be able to attract the staff to work there? We will look at the staffing issues in more detail a little later, as it is one of the key factors for your new business. Without access to the right types of employees with suitable salaries, it is going to be impossible to run your business to the standard required at a suitable cost.
Do you have passing trade you can benefit from? This is a key requirement in many types of business, like juice bars or certain types of restaurants or fitness facilities. The more people that walk past these places each day the higher the chances of earning a good income.
Do the premises you have in mind meet the franchisor’s requirements? Some brands will give you a list of fairly strict requirements that you need to meet to have a location that is suitable for them.
Consider Your Staffing Needs
As we have seen already in this guide to how to start a franchise business, staffing is one of the areas that might be of major interest to you. The staffing needs of different businesses vary widely, so it is important that you focus on a specific type of business in a certain location to calculate the numbers.
The first step is to look into the number of staff that you need to run the business. This isn’t always immediately obvious just from what you see as a client, as there may be a lot of people carrying out work behind the scenes or working different turns.
Therefore, you can do some online research, but getting the definitive answer in this way is difficult. For example, different restaurants in the same fast-food chain could all have varying numbers of employees in them due to the size and location.
The franchisor will be able to advise you on the recommended number of staff, based on their experience with other franchisees. You can also take the opportunity to ask others who use this model directly about their staffing needs and any issues that have cropped up.
It is then a question of finding out how much it is going to cost you to employ this number of people. The following factors will affect the numbers you work out.
Do you need highly skilled labor, or do you only need to fill fairly low-skilled positions? As well as having a big effect on the salaries that you pay, this is also a factor in how easy it is to find the right people. If you need qualified employees, this is going to make the hiring process more difficult.
What is the local job market like? According to the MoneyGeek site, Salt Lake City, Utah, and Birmingham-Hoover, Alabama, are the best places for American job-seekers in 2021. The worst? Hartford in Connecticut followed by NYC and the Los Angeles metro area. The more choices there are for workers, the more difficult it can be to recruit the right people. But if very few people are looking for work then it will also be a complicated issue for you.
Do your business and location prove attractive to job-seekers? Some types of businesses find it easier to recruit staff than others. For example, a fast-food restaurant, laundromat, or juice bar shouldn’t find it too difficult to find entry-level workers like students. However, more technical or demanding jobs like pest control technician or home inspection technician will see your field of candidates narrowed down considerably.
What are the area’s demographics like? Of course, the last point we looked at goes hand in hand with the area’s demographics. If you place your franchise in an area with a lot of students and other young people looking for an entry-level job, you will find it easier to fill these positions. We have already seen that the demographics issue affects your possible client base, but don’t overlook the way it can also make recruiting easier or more difficult.
How can you recruit the best possible staff for your new business? The first big issue to consider is the salary. It is no secret that people find it easier to accept a job with a salary they are happy with. They are also more likely to be motivated and remain satisfied for longer.
However, we should avoid thinking that money is all that matters to your staff. In terms of rewards, you could make the overall package more attractive by adding in benefits such as paid time off, medical benefits, the possibility of paid extra hours, and pension plans. Clearly, these benefits are easier to introduce in some types of business than they are in others.
Factors That Help to Attract and Retain Staff
Away from the salary and other benefits included as part of their overall remuneration packages, you should consider the other important, non-financial factors that keep workers happy.
Feeling valued. This is the top result in a survey carried out by TinyPulse, yet only 21% of the workers surveyed suggested that they feel valued at work. Therefore, it seems that there are a lot of people out there who are keen to feel more valued at work than is presently the case.
The workplace culture. A positive, open culture with good communication is essential for making people feel at home. You can start on this by publishing the values you want the company to show, or a mission statement that sums up your goals and aspirations in a single phrase.
Flexibility. It isn’t always easy to offer your staff the flexibility that they crave. However, it is something to bear in mind and work towards. People are now more concerned with a good work-life balance than ever before, as this helped to lower stress and the risk of burn-out. Being able to offer benefits like flexible working hours or the chance to work from home at times can help you to attract more candidates.
Job satisfaction. We all love to feel that we have done a great job, and the warm glow that comes from this has numerous benefits. Someone who is satisfied with what they do is likely to have a higher productivity rate and speak highly of the company. They should also provide better service to clients and are more likely to go the extra mile to keep everyone happy.
Growth potential. This isn’t something that ranks as highly in every job. With some positions, people are probably going to see them as being short-term ways to earn some money rather than as a career. In other cases, people will be looking for a way to progress their careers and may get frustrated if they are unable to realize their ambitions.
As we can see, there is a range of factors to take into account, and they vary according to the type of business you plan to open. This is why it can be a good idea to speak to other franchise owners in the same industry. What staffing challenges have they come across and how did they manage to overcome them?
There are two key elements here: your own training needs and those of your staff. If you plan to work in the franchise, you will want to gain all of the skills that you need to do it to the highest possible standard.
When seeing how to start a franchise business, you should consider factors such as how appealing the work is and whether it suits you. You also need to see if special licenses or qualifications are required to work in this sector.
Even if you don’t plan to be fully hands-on on a daily basis, it makes sense to find out everything you can about the business, as this will allow you to feel fully in control and make informed decisions at all times.
A common approach for franchisees is to hire a manager. This person will oversee the day-to-day operations, so it needs to be someone that you trust fully. The franchise details will often explain what to look for in your manager. If you are unclear on any of it, you could speak to other owners to see what skills they have found useful in their managers.
When it comes to advertising for a manager, the franchisor may advise you on the wording to use and the process to follow. This is a hugely important part of the process and something that you will want to get just right.
Putting a comprehensive staff training plan in place is also crucial, as employees prefer to see that they have something in place to help them develop and progress over time.
Opening Your Business
Once you have reached this stage in the process of opening your own franchise, you will be anxious to get started as soon as possible. It isn’t a good idea to rush through the preparations for your opening day, though.
It is a good idea to try and attract a good crowd of visitors to your premises. People don’t like to see empty spaces and an apparent lack of interest in a new business opening. On the other hand, if passers-by notice that you have attracted a big crowd, they might be more tempted to take a closer look or at least bear it in mind for the future.
Inviting your family, friends, and other contacts to the first day is a great idea. This will help to boost the attendance and may convince others who see what is happening that this new business is going to be a big success.
One of the top advantages of joining an existing brand is that there is less chance of things going wrong. A completely new business will often be using untried technology or will be trying new things that might not work perfectly the very first time on opening day.
The brand will also have experience in opening days, so they are likely to be able to give you some good tips on how to do it well. As with other points we have looked at, you could also speak to other business owners who have invested in the same franchise and ask for some detail of their opening day experiences.
This is a good moment to offer special deals that encourage your first-day visitors to come back again another day. You want to give them a good impression of your services and of the way you treat people. A discount coupon that they can use another day is an example of the sort of smart approach you can take in this respect.
Of course, one of the main issues is that it is difficult to know exactly how many people will turn up on your opening day. You don’t want to see a lot of empty space, but having to turn away clients because you underestimated the level of demand could be just as bad for your reputation. It might make sense to bring in extra staff on the first day, to ensure that you give the appearance of being a slick operation and don’t end up short-handed if it gets busy.
Growing Your Business
After you have got through the early days with your new business, it is a question of trying to then grow it on a sustainable basis. Part of this comes down to having a solid business plan from the very beginning, but in what other ways should you be looking to achieve steady growth?
Build strong relationships. The fact that you have joined a franchise with an existing reputation is a good start. But it is still important for you to build strong relationships wherever you can. This includes clients, suppliers, local business communities, and everyone else that you come into contact with.
Give great customer service. Top-quality customer service is always a key element for any business that grows over time. Many of the most popular types of franchises are in areas where a positive, customer-first attitude is essential.
Look for new markets. Since you will be working under the franchise, you are going to be limited in terms of the innovations that you can make. The products and the design of the premises may be clearly defined by the franchisor, but you can still expand by looking for new markets, attracting new types of clients, or looking further afield for your next set of paying customers.
Know your strengths. Every type of business has certain strengths that it needs to use to its advantage. Maybe your brand is known for its terrific value, for speed of service, or for some other reason. Adding other positive factors to the client experience is good news, but you should never neglect the basics that people expect when they see the brand name, as this is what has made it such a strong business model in the first place.
Become a valued part of the community. Businesses can give back to their local community in various ways, by donating money or products, sponsoring worthwhile causes, and participating in events.
Keep searching for things that work. The franchise model gives you the flexibility to find ways of attracting clients, from social media to hosted events and so on. The more different ways you have of bringing in new customers, the higher your possibilities are of growing from one year to the next.
Consider opening multiple franchise locations. If this model has worked for you in one location, you probably want to consider whether it makes sense to try and grow through opening one or more new locations. However, you will want to be careful that you don’t over-stretch by doing this.
Starting any sort of new business is a daunting prospect at first, but you can make it a smoother start by using the franchise model and benefitting from what other people have learned while running the same business.
You need to approach this business model in the right way and do a lot of research before writing a business plan, as well as taking into account all of the other key factors that we have looked at. If you do this, the strength of a good franchise will help to increase your chances of achieving the success that you are dreaming of.
Don’t forget these key areas:
Carry out research
Choose the right kind of business for you and for the local market
Have a clear business plan
Learn from other franchisees
Accept training and support from the franchisor
Do all of these things well and your chances of starting a successful, profitable new franchise will increase significantly.