Skip to main content

11 Key Steps in Opening a Franchise: An Overview of the Major Franchise Buying Stages








Opening your own franchise business is a BIG step for those who choose the venture — and it can be somewhat intimidating.
1. Self-evaluation: what appeals to you about opening a franchised business? Are you ready, willing and able to work long hours, including weekends and holidays (especially in the beginning)? Can you commit to following pre-determined business methods with very little variation, if any variation at all? Can you accept paying a portion of your profits to another entity (the franchisor)? Are you comfortable with the reputation of your business being largely dependent on the franchise’s network and not just your business unit?
Furthermore, how much of your personal cash are you willing to part with to establish the business? Unless you’re fortunate enough to have enough money personally, do you have adequate assets (savings accounts, real estate, securities, etc.) to secure a loan?
2. Pick a franchise consultant to assist you (optional): despite all of the information available online, it’s still a good idea to enlist the help of a franchise consultant to help guide you through the process.
Much like a real estate agent is a good ally in the purchase of a home, a franchise consultant has industry-specific knowledge and can relate possibly complicated topics (including aspects of agreements and disclosure documents) to you in a more understandable way. A franchise consultant could also potentially keep you from experiencing pitfalls that may happen without their expertise.
3. Research: what kind of businesses can your area sustain — and are those the type of businesses you’re interested in opening? Federal and state governments provide free access to statistics and other data. Use the info gathered to match up your personal situation and the business environment of your area with a suitable franchise system. Plus, your common sense and gut feelings are good guides to figuring out what businesses are and could be sustainable in your locale.
Once you’ve narrowed your search down to a few strong contenders, request the franchise application from those companies. After the franchise decides that you could be a good match for their system, they will send you a copy of their franchise disclosure document (FDD). The FDD will give an even deeper look into their business system.
4. Attend a ‘discovery day’: a discovery day is an in-depth meeting between the franchisor and one or more potential franchisees. It can take place at a local outlet, but most likely will happen at the company’s corporate office.
Often, the franchisee or franchisees in attendance will see presentations about what the franchisor can offer in terms of support, and can ask questions. If done at the corporate office, a tour of the different departments and introductions to franchisee training and support personnel are common.
5. Speak to other franchisees: within the FDD provided by the franchisor is a listing of all current franchisees in their system. Find a few that are close to you and pay them a visit. Are they satisfied with the franchisor’s support? Is the reality of the business in line with prior expectations (financially and otherwise)?
6. Find a suitable location: if you’re located in a low traffic area or an area where there are no complementary businesses around, how are you going to get customers? The franchisor will delineate certain parameters for your territory in the FDD and franchise agreement. In addition, most franchisors assist with site selection. If you choose a suitable place for business on your own, the franchisor will have to approve your location before you can move forward.
7. Choose a franchise and secure funding: after you’ve completed your research, it’s time to make the big decision — which franchise system will you invest in?
Once you have decided, you’ll have all of the information necessary to complete a business plan and present it to potential lenders. There are numerous financing options out there for you to consider: bank loans, SBA (Small Business Administration) loans, HELOC (home equity line of credit), etc. Remember, you’ll need enough cash reserves to cover expenses until the business begins to turn a profit, which in some cases can be months after opening.
8. Sign the agreement: while many franchisors have rigid franchise agreements, some franchisors may be more flexible about negotiating terms in the agreement.
If the franchisor is willing to negotiate certain terms (like lease parameters), it’s a good idea to seek counsel from a lawyer with franchise-specific experience to find the best solutions for your particular situation. If the franchisor does have a rigid franchise agreement, that isn’t a cause for concern. Remember, franchises are based upon a proven system and consistency of the brand. If the franchise agreement for the brand you chose is overly negotiable, it could be cause for deeper investigation.
9. Obtain all necessary permits and insurance: each industry has its own requirements for permits and insurance. Regulations by state, city, county, etc. will vary as well. The franchisor will likely have background knowledge of the permits and insurance needed to operate their business system.
However, it’s a good idea to check with local authorities to ensure compliance. Two good websites to use as a reference to what permits and insurance might be necessary for U.S. businesses to obtain are the Small Business Administration and FindLaw.
10. Hire staff and attend training: the number of staff members needed to run the operation will depend on the type of franchise chosen.
One of the most appealing aspects of franchising to those wanting to open a business is the training component. Franchisers usually provide training, in a combination of classroom and practical experiences, to at least the franchisee and another manager. A copy of the franchise operations manual is also typically presented at this time.
11. Open your franchise business: before opening, you will need to alert potential customers to their new marketplace option. Franchisers will often have defined processes for signage, ads, and other initiatives to be performed. Estimates for these initiatives will usually be a part of the start-up costs quoted in the FDD.
Some franchisors will do a ‘soft opening’ before the ‘grand opening’. A soft opening is designed to smooth out problems with the operation of the business before the big marketing blitz and hopefully larger crowds that will come with the grand opening. Some franchisers also arrange for a corporate trainer to be on hand at the franchise location during the opening days.
Hope you liked this article. If you are looking for opening a food franchise, wants to setup a new restaurant, looking chefs for your restaurant then SelectDine will help you. Call us or visit our website to know more.


Comments

Popular posts from this blog

Own Chai Sutta Bar in 15 lakhs

Chai Sutta Bar is a premium brand which is currently franchising in India. Chai Sutta Bar headquartered in Indore was established in 2016 and since then operates twenty-six outlets across India.Chai Sutta Bar has various types of outlets that you can open if you choose to invest, which includes both sit-down and quick service models. The brand additionally offers operating manuals, expert guidance from head office, billing systems, and on-field assistance for the franchisee. Offering a high profit margin at a low investment cost along with excellent support, you can own a Chai Sutta Bar in 15 lakhs, should you choose to invest. To know more about this brand’s investment details, visit our website to know more .

How to Safeguard Franchise Fraud

The case of buying, owning, and operating a franchise can seem quite compelling: You, at least in a sense, own your own business, but you are not alone during the operation. The product or service has already been fully developed; it's simply up to you to offer the product or service on your own terms. There are people out there offering fraudulent opportunities; and while you may think that it could never happen to you, fraudsters are getting more sophisticated in their methods of deception. What is Franchise Fraud? Common forms of franchise fraud include misleading and fraudulent sales practices used to entice prospective franchisees to purchase and invest in a franchise. Misleading sales tactics can come in many forms. One of the more common forms of fraud in the franchise arena is the making of false or misleading statements about projected financial performance. It is, in fact, unlawful for a franchiser to provide any representations of potential or actual financ

Restaurant Management Software For Your Business

Restaurant owners most of the time, have to contend with the daily grinds of running their businesses. Managing a restaurant is undoubtedly one of the most daunting tasks that an entrepreneur can undertake. Restaurant management involves lot processes that if done right, would ensure the smooth flow of the enterprise and even increased profits. However, doing all the hard work does not cut it when it comes to restaurant management. Many restaurants end up earning pretty much the same despite best efforts on the part of restaurateurs and managers. This is especially true for small restaurants. Many mom-and-pop operations still contend with the hassles of keeping up with the daily requirements of food service such as menu planning, order taking and inventory update. Fortunately, many technologies are being developed to aid restaurant owners in their everyday undertakings. These technologies take the form of devices and solutions designed to make restaurant owners’ lives a li