Franchising is one of the most popular business models today. It’s also an extremely profitable business option that not only allows you to earn a living but also helps you generate passive income and even build an empire. However, despite its positive effects on your life, franchising can be challenging to understand, especially if you don’t have any experience with it.
Today we’re going to share with you some valuable information about franchising without having to read through drivel and inaccurate guides written by people who couldn’t care less about your success.
When you are choosing a franchise, there are a lot of things that you should take into consideration. The business is your own, and you can change your mind anytime you want to—no need to worry about that!
You get to be well taken care of by the franchisors, who will even help you start up the store. But if you plan to open your own franchise, we will discuss 10 important steps that you must take first for it to work out perfectly for you!
Here are 10 important steps to start a franchise business.
Step 1) Self Evaluation
The first thing you do in the process of opening a franchise is a self-assessment. Unfortunately, most people rush through this most critical step—taking a hard inventory of the skills and experience you bring; assessing the financial and time resources you’re ready to allocate to the business; and what family support you have.
If you don’t support them, don’t continue until you have their support! Self-assessment means taking a hard look at your situation as much as possible.
You also want to determine how much you think you can commit to following a predetermined business approach. Are you willing to put in the work and long hours required to start a franchise business?
Step 2) Find an Experienced Franchise Consultant
Once you’ve conducted a self-assessment and determined why you’re buying a franchise, seek help from an experienced franchise consultant to guide you through the process.
Our franchise consultants will build on the self-assessment you have done to help you get clear on what your ideal business model should be. Once that’s determined, they’ll introduce you to businesses that are a reasonable fit for your ideal model.
One of the primary responsibilities of a franchise consultant is to help you understand the many nuances and complexities of researching and opening a franchise business.
Step 3) Do Your Research – Understand The Franchisor’s Business Model
Once you’ve contacted a franchise consultant, do your research! Talk to the franchisor to understand what the business model is from their perspective.
Find out what kind of business you are interested in opening and find out why the franchisor thinks such a franchise is needed in your area.
Step 4) Do More Research – Talk To Existing Franchisees
For the system you’re considering, you’ll need to talk to enough existing franchisees (we recommend talking to at least 10 to 12 people)! They give you the best view of what’s going on in their franchise system, for better or worse.
For a full list of questions to consider, check out our detailed list of questions in our Q&A section. This can give you a real sense of what to expect when you open a franchise yourself.
Step 5) Gut-check time—Meet The Franchisor’s Team Face-To-Face At A Discovery Day
If you’ve done this, you should now be doing 2 to 3 months of research and you should be very close to making a buying decision.
You should have a solid understanding of the business model, the value proposition you will offer, the resources you need to acquire and start your business, the people you need to hire, the marketing you need to do, etc.
Most importantly, though, you should be confident that you can and will be able to perform the functions you need to drive business success.
However, before you make your final purchase decision, we strongly recommend that you visit the franchisor’s headquarters and meet with the senior leadership team to ensure there is a strong “cultural fit.” After all, you’re going to be relying on this team for at least the next 5 to 10 years.
Step 6) Secure Funding for your business!
There are many financing options for you to consider, but keep in mind that you will need sufficient financial reserves to cover all the expenses that will arise before the business starts to become profitable.
It’s often said that the number one reason businesses fail is a lack of capital, so here are the key components you need to get funding:
- Total initial setup investment (franchise fees, building expansions, inventory, equipment and supplies, vehicles, etc.)
- Business working capital is almost always underestimated. Business working capital is the amount of money you must borrow or personally inject into a business until it reaches breakeven (the point at which revenue and resulting profits offset ongoing expenses).
- Personal working capital: Most people don’t take this into account. When you are in the start-up phase of your business, you may not receive a salary or bonus from the business, but you may still be somewhat responsible for your and your family’s monthly living expenses. You must use this amount as part of your initial investment.
Step 7) Professional Review
Just before you sign an agreement, seek advice from a franchise attorney – an attorney with extensive experience in the franchise industry.
Their role is to help you understand your rights and obligations as well as those of the franchisor. They will also identify any issues or risks that may be unique to the franchise system you are considering.
Step 8) Signing the Franchise Agreement
After completing the legal review, there is only one thing left to do, which is to sign the agreement and pay the franchise fee.
Once this is done, your next step is to ensure that you have all the necessary licenses and insurance required to operate your business system (each franchisor should provide you with specific instructions and guidance on what is required for their system).
Step 9) Location, Location, Location
If your business is location-based, you have to find the right location. You need to identify the best franchise to open to have the greatest impact.
Keep in mind that franchisors will often assist with site selection to varying degrees, so you need to understand how much location assistance the franchisor you are considering will provide.
Step 10) Follow The System
Every franchise has its own referral system and process, so you have to follow the process you just paid so much for! Take the franchisor’s training and hire the staff you need, as directed by the franchisor.
The franchisor has usually already defined the process for initial marketing and grand opening advertising, so you also need to closely follow their proven strategy. When you’ve done all of this, you’re ready to start your franchise business!
This list of ten crucial steps to franchise success should be helpful to anyone looking to get into the top franchise business. These points will help you build a solid foundation for franchising and help you make a smooth transition to franchising.
As the saying goes, to not prepare is to prepare to fail. Keep these steps in mind, and don’t let yourself get caught in flames.
In 2018, Mr Iqbal Saleem joined an e-commerce website with the name vivid shop. It is an online store where you can buy toys, gifts, and all kinds of accessories for your kids and yourself too. It is a B2B online store that provides services to customers who can’t go to markets to buy things for their children. We have a super creative staff that answer all of your questions. Just send us your query, and we will be there to help you.