Tips on starting a franchise are invaluable if you’re thinking about diving into the franchise world. Owning a franchise can be both profitable and rewarding if you go about it the right way. The process doesn’t have to be difficult, but it does take time and planning if you want to create success. If you’re wondering how to start a franchise as a profitable investment, there are some pretty simple Do’s and Don’ts to follow.
If you can play by the rules and exercise some discipline, you may just find that a franchise is a perfect business fit. The idea behind this type of business is to duplicate a proven model, which then leads to duplicated success. An ideal opportunity should include the best products or services, top technology, efficient systems, effective marketing and high-quality support. It’s really up to you to make sure these factors are in place for the franchises you consider.
Shopping around for a new business can be exciting, and also stressful without a plan. We have learned that taking a step – or two back before diving in saves a ton of stress, time, and money. We have pulled together some of the best tips and resources to guide you through starting a franchise successfully and keeping it going.
Take Time for an Honest Evaluation
There’s not much worse than spending your hard-earned money on a business you don’t enjoy working. But not everyone is cut out to own or operate a franchise and before you spend a dime, it’s critical to assess your personality and skillset to really know if franchising is right for you.
You’ll also want to talk with anyone your decision will impact. This whole adventure will be much more enjoyable if everyone is on board – or at least in the loop.
Develop a Realistic Plan
Mapping out the work that a franchise will require of you as the owner is a must for creating a successful plan. Even if the ultimate goal is sheer ownership and leaving operations to others, it won’t start out that way. Being realistic about physically working your business, at least in the beginning is a huge benefit when you’re plotting your goals. You’re also going to need a written business plan to apply for loans. Click here to craft a business plan.
Do Your Homework – Researching Franchises, Industry, and a Franchise Attorney
The steps to start a franchise begin before it’s time to shop your options. You don’t need a PhD, but you do need to follow some simple steps for best results. Again, time, stress, and hard-earned money are at stake, and diligent research can make all the difference in the final outcome. The Franchise King offers excellent tips on what to research and how to get the right information.
Before you start shopping for a convenient location, you’re going to need to know which franchises are worth your investment. Start here for a simple research outline. We can’t emphasize enough that the more research you do upfront, the fewer headaches and loss you’ll have along the way. The point of doing the research is so you can be proud of your franchise, and enjoy the benefits of being your own boss. It’s important to choose a comfortable fit for your personality and skill set.
You don’t have to search too far to see there are plenty of franchisees who regret the businesses they chose. The majority of them never did proper research about the franchise itself or even the industry it served before dropping a hefty franchise fee. Part of your research should include asking unhappy franchisees questions about their experiences. These folks have hands-on experience, which can paint a very different picture than you might see during a Discovery Day. Not all franchisors are at fault, and many owners simply aren’t a good candidate for franchising. But other owners can share insightful information about the actual support they receive and the profitability of their businesses.
We know, you might think you don’t need an attorney. You don’t. You need a franchise attorney – not a neighbor with a JD or a relative who’s an accountant. When the Franchisor hands you their Franchise disclosure document, you’re going to want a trained and experienced professional to review it with you. If a local franchise attorney collects several hundred dollars for her services, it’s far less than you’ll waste on a bad deal.
Search franchise opportunities on some of the top-rated franchise portals below.
New Franchise Opportunities
Existing Franchise Opportunities
Form a Business Entity and Set Up Books
If you’re certain you’re going forward, forming the right corporate structure at the beginning prevents some major headaches down the road. Being incorporated provides certain protections from the potential loss of personal assets, and most franchisors want to work with an established business, not just a sole proprietor. Forming the best corporation for you depends on matters like business taxes, industry, and personal liability. To help you choose the right business formation, our support team is standing by to help.
Contrary to many failed business owners’ beliefs, the right time to set up your accounting books is not after you get started. Every penny and every receipt should be accounted for on your new franchise. Even a simple spreadsheet accounting system eliminates guesswork and will support your business in the event of an IRS audit.
Tip: Businesses that don’t keep proper books tend to raise audit flags because of inevitable misreporting. Any business that has endured an audit would tell you to keep good books. You’re better safe than sorry.
You can learn more about setting up your books here. You’ll need to decide if you or someone else will manage the books. Whatever you decide, make sure your records are kept current and accurate. There are many viable apps and tools available to easily manage your books and potentially save some money. If you’re uneasy or just don’t have time for this task, take a look at PC Mag’s Best Small Business Accounting Software review. Working backward to assemble neglected books isn’t the best use of any owner’s time. You can prevent added stress and even financial loss by keeping an organized accounting system.
Prepare Your Finances
All Franchisors collect a Franchise fee ($35-$45k average) when you enter into a contract. But you’ll need at least enough liquid assets or lending to pay for everything from utilities, to taxes and insurance, marketing, and payroll. No matter which franchise you buy, you can expect to support yourself for about two years before seeing the financial fruits of your labor. This timeline does not fit every industry, but it’s a realistic estimate, and you need to be realistic.
A serious look at your whole financial picture is necessary for a healthy start. Pull together all assets and debts to determine how much cash you’ll have on hand to get you through starting up and lean times in the future. This Free Net Worth Calculator will help to create a solid financial picture. Being prepared for worst-case scenarios can strengthen your success rate. If you find you’re still moving forward at the end of your research, click here for an excellent source of all things franchise.
Moving Toward Discovery Day
At this stage, you should have narrowed down possibilities to two, maybe three. Ideally, you’ll only attend one Discovery Day. The cost to travel and stay near Headquarters is on you, but many Franchisors will cover all or part of your expenses if you follow through with them. Now that it’s time to start approaching Franchisors, you’ll want to prepare for travel, and for writing the Franchise fee check. Saving Discovery Day for only your top franchise will save excessive travel expenses and simplify your choices.
The Franchise process is usually efficient, but it does take time. Plotting your path before wasting time and money will give your business the best chance at success, and we hope you’re successful for the long haul. Here’s a quick list to get you started.
If you have been wondering about how to start a franchise successfully, we hope these tips on starting a franchise will guide you toward a sound decision. If you’re serious about franchising opportunities, we’re here to help you incorporate and handle all of your business formation needs. Venturing into the franchise world will require discipline, focus and a willingness to follow rules. Working through your plans to a methodical end will make the process simple and sane.
Taking the time to manage each step in order will ensure you’re making steady progress on your franchise journey. Even if you come to the end of researching a franchise and find that it’s not the right fit, keep going! There are literally thousands of other options. The point of researching is so you can see what ‘not’ to do as much as what you should do. In the end, you want to own a franchise you don’t regret buying. This isn’t just another job we’re talking about; it’s your future.
Let us know what you have learned along the way of your franchise journey by leaving comments below.
This entry was posted on Thursday, October 15th, 2020 at 9:00 am and is filed under Starting A Business, Incorporation, Limited Liability Company, New Business Ideas, Small Biz Management. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.