How To Start Your Own Franchise Business – Nothing represents the “American Dream” more than owning your own business and being your own boss. As an entrepreneur, you can build your wealth and success from the ground up and create a better life not only for you and your family, but also for your employees and your community.
Sounds good, right? Unfortunately, entrepreneurship is easier said than done. As many Americans start their own businesses, they too often face unexpected obstacles to success: too little funding, a messy marketing plan, and even the burden of dealing with taxes and legal paperwork. As much as people want to be their own boss, starting a new business is not easy. This is where the franchise model comes in.
How To Start Your Own Franchise Business
When people think of franchises, fast food giants usually come to mind. But what is more similar to the franchise concept is the idea of a “business in a box”. Even before signing the franchise agreement, you will receive the company’s support and guidance, as well as how many franchisees have achieved success in their franchise locations. When you subscribe, you get ongoing support, help with recruiting and training employees, and a tested and proven business plan – all while leveraging the franchise’s brand equity at your own location.
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The path to entrepreneurial success becomes much clearer with franchise ownership. All you need to do is think about the type of industry you are passionate about and what goals and budget you have to work with. Once you have an idea of your own interests and resources, you can speak with a franchise consultant who can help you research and find a franchise that fits your needs. A consultant will then help connect you with other franchisees and guide you through the necessary legal documents, such as the Franchise Disclosure Document (FDD) and Franchise Agreement. After that, you are ready to work with Corporate to prepare for opening day.
Owning your own business doesn’t have to be easy, but it doesn’t have to involve taking a lot of risk. With the franchise option, the business plan has already been prepared, and its success has been proven by other franchisees – and the process of becoming an entrepreneur and your own experience of success are guaranteed.
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After the initial stages of starting a business, many entrepreneurs start thinking about scaling. One way to create a successful operation is franchising. Read on to find out:
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A franchise is a type of arrangement that involves replicating a successful business model in multiple locations. As a business owner and franchisor, you must create a franchise agreement to start the process and open a new franchise.
This agreement allows franchisees to acquire limited rights to your intellectual property, supply chain networks, training systems and more to open and operate a new location for your business.
Franchising and licensing are two different ways to share your brand information for a fee. Differences between a franchise and a licensing center around management and operations:
The type of franchise that is right for you depends on the size and complexity of your business and the industry in which you operate.
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Including the preparation, the franchise usually lasts three to four months. The process may be faster depending on the complexity of your business model.
The cost of a franchise varies by industry, state of residence, and more. Sometimes it can cost less than $20,000 in total, but some franchises cost close to $100,000 or more.
The Federal Trade Commission (FTC) regulates franchising at the federal level, but each state has its own rules and requirements for franchising. To ensure you don’t miss any state-specific requirements, it’s best to speak with a franchise attorney who can help you prepare the documents for your state.
If you decide to franchise your small business, you must be prepared to hire new independent contractors to manage their individual franchises.
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Before starting down the franchising route, there are a few questions you should ask yourself to make sure your business is franchise ready.
The answer doesn’t have to be “yes” to every question, but you should aim to give honest answers to highlight your blind spot weaknesses.
According to Blair Nicol, CFE, vice president and director of franchise consulting firm FranNet, it’s best to start with an original location that you already have. Small business owners, he said, “should have doubled down on the concept a few times already. That way, they have a replicable model that’s proven to work anywhere.”
Giving franchisees access to a wealth of intellectual property is central to franchising your business. This allows them to develop their franchise according to your guidelines and encourages the growth of your business, but can put you at risk if your intellectual property is not properly protected.
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Before embarking on the franchise process, make sure you protect the intellectual property that makes your business unique and recognizable.
Under the Franchise Rule, you may not sell a franchise to a prospective franchisee until you have provided them with an FDD that complies with FTC rules and regulations.
The FDD is like the organizational charter of the franchise – it outlines the key players, defines the terms of operation, includes the financial statements and deals with the obligations of the franchise agreement. In fact, it must contain 23 specific sections according to the Franchise Rule:
These requirements are important to ensure that the FDD is a living document that informs franchisees of the most up-to-date information.
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Tip: Give potential franchisees as much time as possible to review the FDD. It is in your best interest to only align with franchisees who are fully committed to their investment – their success is your success.
A franchise agreement is a contract that binds you and the franchisee to certain expectations that define how the franchise will operate. The franchisee is an independent contractor, not an employee, and must sign this agreement to comply with the franchise. Once signed, it will be included in the FDD that you compile for each franchisee.
A franchise agreement does not have to follow a specific format, but the best agreements are clear and detailed. It can be yours:
Not all of the above conditions apply to all business models. Working with a franchise attorney can help you create a comprehensive and concise franchise agreement, taking the guesswork out of starting a new franchise.
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This manual is not necessarily a legal document that the franchisee signs, but is incorporated into the franchise agreement. Therefore, it is the franchisee’s responsibility to acknowledge and comply with all related obligations. However, franchisees don’t operate exactly like you. Be prepared to relinquish control over your business concept and how it is executed, as long as all requirements are met.
Once the FDD is complete, store it securely so you can access and update it when needed. Your FDD is a required document, but whether you must submit your FDD to the government depends on the state in which you live.
Registration states, filing states, and non-registration states all have their own requirements for franchisors. For example, non-registration states require you to place a trademark on your disclosure documents.
No matter what state you live in, consulting with an expert can help you determine exactly what to do with your FDD.
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Franchising your business is an excellent opportunity to sell your successful idea to others. The business goals you set for your franchise should be realistic, and you will need a realistic strategy to achieve them.
Your strategy should be unique to your business, your community, and your growth goals. Some good ideas to consider when developing your strategy:
A thorough and honest FDD is a useful explanatory tool when trying to sell your franchise to a new franchisee. It can help answer common questions or serve as a resource to promote the benefits you offer, such as a special employee training program.
Owning a business is rewarding work and often requires making difficult decisions. Weigh the pros and cons of franchising your business to find out if franchising is right for you.
Reasons Why Buying A Franchise Is Better Than Starting Your Own Business
A franchise is an important tool for a business owner. This is a growth-promoting concept that can benefit you if business expansion is possible. The advantages of franchising are as follows:
Franchise scalability ultimately determines how much diversified and passive income you can generate. Regardless, franchising offers unique growth opportunities.
There are many advantages to franchising, but there are also disadvantages to operating this type of business model. The disadvantages of franchising are as follows:
When money is tight, it’s long
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