If you have always wanted to run your own business but don’t want the uncertainty and risk of starting one, owning a franchise may be right for you. A franchise is a business in which a company, called the franchisor, allows an individual or partnership to run a unit of the business. The franchisor owns the company name, logo, trademark and business model, and licenses the use of them to an independent operator (the franchisee) for a fee.
The franchise business model is very popular in the U.S. and can be found in a wide variety of industries such as restaurants, tax preparation services, automotive repairs, cleaning and maintenance services and many more. Currently, there are about 750,000 franchises within the country.
Buying a franchise requires paying an upfront fee to the franchisor. This fee gives the franchisee the right to operate a business using the company’s:
- Name and logo
- Products and services
- Business model
- Training, operating and marketing resources
- Proprietary trademarks or technology
The fee is usually due before or upon signing the franchise agreement (contract). Upon payment, the new franchise owner begins the process of opening the new business under the direction of the franchisor. This includes everything from interior design of the store to buying equipment and product, hiring staff, and engaging in marketing. Once the franchise business begins operations, the franchisee is required to make ongoing royalty payments to the franchisor. These are usually determined by a percent of the gross sales from the franchise business.
Franchisees must also abide by certain requirements of the franchisor in terms of branding, advertising, pricing, products, and more. For example, they will be expected to provide company-approved products and services, and to use the uniforms, signs, logos and advertising to align with the company’s brand. Franchisees must also pay an advertising fee, which goes to support national and local advertising for all franchise owners.
Buying a Franchise
One of the biggest advantages of buying a franchise is that it involves less risk. Instead of starting from scratch, you get a proven business model and operating system that enables franchisees to avoid many common start-up mistakes. Other benefits of owning a franchise include:
- Using a single trademark and business concept creates quick brand awareness of your business.
- New franchisee training provides immediate operational expertise that would otherwise take time to acquire.
- The collective buying power of the franchisee network helps reduce costs when purchasing materials, supplies, and services for the business.
- You get backing and support from the franchisor when negotiating lease terms for your location.
- Standardized products, systems, and accounting procedures streamline operations and make it easier to train new employees.
- In addition to national and local advertising programs, franchisors usually provide point-of-sale advertising as well.
- Most franchisors provide financial assistance, ongoing research and development, site selection guidance and marketing support.
Franchising also allows for expansion if desired. Once you have operated a successful franchise, starting a second or third business becomes easier.
Owning A Franchise
Buying into a franchise doesn’t happen overnight. It takes a lot of research to find the right type of franchise to meet your personal and financial goals. This is followed by a lengthy process of buying the franchise license, designing, building and equipping store and finally opening for business.
1. Research potential franchise opportunities.
Operating a successful franchise requires finding one that matches your skills, resources, and interests. If you know what type of business you want to run, a simple Google search will identify franchise opportunities in that industry. Otherwise, franchise websites like FranchiseGator will allow you to browse opportunities by location, category, and other criteria. When you find one that interests you, pay close attention to the following:
- Franchise qualification requirements. These will range from net worth and credit score to age, interests, and industry or management experience.
- Total required investment. This will include franchise fees, training expenses, costs for leasehold improvements or real estate and more.
- Ongoing costs. This includes royalty fees, advertising fees, and operational expenses.
- Training and support. Find out how much is provided, when, where and if you have to pay for it.
- Competition. Are there other franchises near you? How much competition is in your area?
2. Contact a few franchisors that interest you.
At this point, you need to obtain two documents: the initial application and the Franchise Disclosure Document (FDD). The initial application helps franchisors determine if you’re a good fit for their industry and business model. The FDD, also known as the Uniform Franchise Offering Circular, provides in-depth information about the franchisor, including its legal history. It also outlines your responsibilities as a franchisee and the fees you are required to pay. Take the time to read the FDD carefully.
3. Attend the franchisor’s Discovery Day.
This usually takes place at the franchisor’s head office and includes group presentations, one-on-one meetings, interviews and a visit to a franchise. It also provides an opportunity to:
- Get to know the management team
- Ask questions about the business
- Learn about the company culture and the people you will be working with
- Learn about the company’s growth plans
At the same time, the franchisor team will be evaluating you. They will want to see your level of enthusiasm for the business, your willingness to follow franchisee rules and other personal characteristics.
4. Review the franchise agreement.
The franchise agreement is a formal contract that gives you the legal right to own and open a franchise. It is a complex document that obligates you to many contractual agreements. Hiring a franchise lawyer to review and discuss the contract can help you fully understand what awaits you as a franchisee.
5. Get the right financing.
You may need to borrow funds to pay for the franchise fee, design and construction, and leasing or equipment. Small business administration and bank loans are the most common source of funding. If you have sufficient funds in a retirement account, you can apply for a rollover for business startups. This allows you to withdraw money from the account to fund your franchise without paying early withdrawal penalties or taxes.
6. Choose a location.
The franchisor will provide guidelines to ensure you meet their location requirements. These can range from proscribed distances from other franchises to minimum square footage, number of parking spots and more. Sometimes the franchisor will have locations in mind. If not, a commercial real estate agent can help you find a location that meets the requirements. Other considerations include buying versus leasing, office versus retail site, or having a standalone site.
7. Get trained.
Few things are more important to your success than full participation in the pre-opening training. Even if you have experience in the industry, you still need to learn the company’s business model, operational and financial procedures and makeup of your customer base. Training typically lasts one to two weeks and covers everything from the equipment you will need to how to negotiate with suppliers and hire employees.
Many franchisors require working in a real store as part of the training.
8. Prepare for the grand opening.
The grand opening usually revolves around promotional and marketing programs that allow you to build a customer base as quickly as possible. The franchisor will provide strategies for having a successful opening. Tapping into the franchisee network is a great way to learn what has worked for other franchise owners.
Keep in mind that buying a franchise doesn’t take all the risk out of starting a business. But if you find the right franchise, follow the steps for buying it and adhere to the franchisor’s business model, it will significantly boost your chances of success.
Owning an Instant Imprint Franchise
The quickest way to succeed in business is to help someone else succeed. That’s what we do at Instant Imprint, and we have fun doing it!
We’re a full-service promotional marketing and visual communications business that helps our customers get noticed through five different services:
Our business model is built around customized products delivered with great service. We provide world-class quality and value combined with the personalized attention that keeps customers coming back.
What’s in it for Instant Imprint franchisees?
- Locally owned and operated stores
- An experienced management team
- Different franchise models and options to choose from
- In-depth location, training and marketing support
- Loyal customers who love our products
- Everything you need to run a successful franchise business
Take the next step to becoming a business owner by learning more about the Instant Imprints franchise opportunity.