Eager to own your own business that has a well-established brand and proven business model? A franchise could be the best choice for you! What is franchising? It is when a company sells you the rights to their existing business model and products. Opening a franchise presents a rather low risk with incredible support, however it is important that you are aware of any regulations or circumstances that have made the franchise profitable. Startup costs range from business to business, but you should expect to invest anywhere from $50,000 to $200,000 to get your franchise going. If you are an entrepreneur that is interested in owning and operating a franchise, follow along for more information on franchising basics and the best opportunities today.
Creating Your Dream Business
Most entrepreneurs aren’t thinking about opening a franchise when they are dreaming about what their future business will look like. It might not be your initial thought, but it should be considered as there are many perks to owning a franchise. Opening a franchise gives you the opportunity to own your own business while investing in a brand that has already been established and a business model that is successful. Franchises are well supported businesses and for most franchisees, it is a practical way to become a business owner. Franchises come with reduced risk and high reward. Franchisers cannot be successful if their franchisees aren’t, so they provide their franchisees with a support team that is dedicated to helping you through the process, from choosing their location to hiring employees to the opening. While it may not have been your initial choice, a franchise can quickly become the business of your dreams. Let’s dive into all the things you need to know about franchising.
What Is Franchising?
Franchising is when a company sells an entrepreneur the rights to their existing business model and products. But the exact definition can vary as there are several statutes that have been passed by individual states and the Federal Trade Commission. When you buy a franchise, you are investing in a business that has already been established, with products or services that are ready for customers. Franchises typically come with a brand name that is easily recognized, marketing strategies that work, and a successful business model. Entrepreneurs like buying franchises as it is an easy way to startup a business without having to worry about any guesswork.
How much it costs to buy a franchise can vary depending on the business you are planning to open. Typically, most franchisees spend between $50,000 and $200,000 to get started.
- Financing application fee
- Initial franchise fee
- Attorneys’ fees– you should have a lawyer review your contract
- Corporate fees
- Accounting fees
- Permits & Taxes
- And more…
You should also take into consideration the ongoing expenses that come with operating a franchise. This consists of marketing, advertising, equipment, payroll, and inventory.
There are federal regulations that have been put into place in an effort to protect the rights of the franchiser, as well as the franchisees. The Federal Trade Commission helps to supervise and enforce franchise laws to make sure that entrepreneurs have received full disclosure on the current state of the business they are investing in and to make sure that the franchisor’s brand is not compromised. Towards the beginning of the purchasing process, franchisers are required to provide a franchise disclosure statement (FDD) to the applying franchisee. This is also referred to as an offering circular. This outlines all franchisor and company fees, investments, and history of bankruptcy and litigation. Regulation and relationship laws are put in place to govern the franchise’s registration, salespeople, and advertising. There are additional laws that deal with terminating a franchise, grounds for nonrenewal, notice and curing periods, as well as equal and fair treatment. These laws and regulations are not the same in every state so you should look up which apply in the one where you are considering opening your franchise.
Seven Things To Consider When Choosing A Franchise
There are thousands of franchises to choose from, so if you are unsure about what type of franchise you want to open, this can seem overwhelming. Here are a few factors that you should take into consideration as you choose the right franchise for you.
New entrepreneurs find franchises appealing because of the benefits that come along with opening a business that has already been established. However, they also come with significant startup fees. You are required to pay an initial franchising fee before you are even able to start setting up your business and selling their products.
Prior to your grand opening, you are expected to come up with a proposal that includes where your store will be located, a business model, as well as royalties and business opportunities. After you and the franchisor have agreed to the terms in the contract, you are then able to prep your store. All of these things are going to cost you more time and money.
Thankfully, there are franchise opportunities available for investors working with every budget. These startup fees can range anywhere from $10,000 to millions of dollars depending on the business.
Having an established name and branding is a big perk of franchising, however operating your own franchise can limit your business autonomy. You might not have the autonomy to grow your business in the direction you would like in order to maximize the opportunities within your community. Carefully consider how much control you want to have over your business before you finalize your decision.
Proven Business Model
Finding a business that already has a proven business model with a history of success is important. Be sure to take the time to figure out where the company stands prior to investing in a franchise. You don’t want to invest in something that is rapidly declining.
Some franchises may struggle during periods of growth as they transition from a small business to a franchise. Do your research and see where they are as a franchise– your success is theirs and vice versa.
Is The Business Well-Established?
You need to be well aware of the parent company’s current status, this includes their business valuation before you agree to any contract. Are you willing to ride the waves through any hard times for expanding franchises? Or are you hoping to join a more established business that will be smooth sailing?
There is no right or wrong choice, but you should be aware of where they stand as a business, so you know which situation you are getting into. Your understanding of the franchise’s current status will make a difference in how you feel about your overall investment.
Who Are Your Competitors?
Another thing to consider is how competitive the franchise’s market is today. While competition is not always a bad thing, as it proves there is a demand for your services or products, it does mean you will have to work hard to make your business stand out above the rest.
How is the franchise’s workplace culture? How the parent company’s management works is going to have a big impact on how you will operate your business and how profitable it is. Essentially, these are your business partners as long as you own your franchise.
Focus your attention on your interactions with management and how supportive they are. Are they willing to answer your questions? Will they provide you with the necessary resources to get your business going? These are important things to note.
Be cautious about investing your own money in a franchise if you are not comfortable with how it is managed– and how that management treats you from the get-go. Find a franchise that you truly believe in and will stand beside you through all the highs and lows. If your first choice isn’t this one, keep looking. There are ample franchise opportunities.
Your personal interest is something that absolutely needs to be taken into consideration. Find a business model that interests you, a product you want to sell, or a service you are excited to offer.
It is okay if this is an industry, service, or product that you are not familiar with, so long as it piques your interest and leaves you wanting to learn more about the business. Avoid buying into a business model simply because you are confident it will bring about substantial wealth. If you are not passionate about your business, it will be hard to achieve the success you are dreaming of. Your success or failure will be determined by the energy and effort you put into your business.
There are several perks to buying into a franchise but one of the biggest is coming into a company that is experienced and offers their expertise to the entire organization. Joining an established brand helps you avoid the many hardships that come with starting a business from dirt. Becoming a franchisee eliminates a lot of the guesswork that comes with starting a business. Their established systems provide you with a head start that you wouldn’t otherwise get. This puts you one step ahead of your competition. Joining a brand that is well respected is beneficial for aspiring entrepreneurs. The advantage that comes with being a part of a business that is respected and well received is invaluable. You start with your business knowing you have consumers that are aware of and can trust your brand.
Additional benefits to owning a franchise include:
- Brand advantages, such as: training, discounts, support, etc.
- Proven business model that has been successful
- Ability to secure financing easier
- Minimum risk for you and the banks
Franchise Opportunities To Keep Your Eye On
Nearly all industries have successful business practices that are or have been sold as a franchise. So, finding the best opportunity for you should be centered around what you are passionate about and the expertise you have about the business. Below we have listed 10 industries where the franchise business is on the rise– one of these might be the perfect opportunity for you.
COVID kept fitness fanatics home for quite some time and while having a home gym is nice, getting out to a fitness center helps with motivation and accountability. Americans are headed back into the gym so they can interact with like-minded folks. Choosing a franchise that is widely recognized, like Planet Fitness or Orange Theory. With a recognizable name and reduced monthly expenses, the right fitness center might be the franchise you need.
Parents are willing to spend money to provide their children with the best opportunities. Educational programs in franchises like The Little Gym and Aquatots are promoting growth, development, and vital skills for thousands of kids nationwide. Investing in educational programs and childcare could prove beneficial for entrepreneurs, especially those passionate about children and their development.
People will always need their hair taken care of. Franchised hair salons like Great Clips and Supercuts are well known, kids-only concepts such as Cookie Cutters help business owners to focus on one market in particular. Hair care is consistently in demand, and you can open a location nearly anywhere.
One of the most beloved, easy foods makes for a great chain. Still, competitors are looking for new ways to make a better cheesy pie. While Dominos, Papa John’s, and Pizza Hut have ruled the market for decades, Mellow Mushroom and MOD pizza are offering a new take on this family favorite.
Paint and Sip Art Studios
Paint and sip studios offer a fun way to spend time with your friends and family. Participants are offered a glass of wine as they indulge in a group painting class. Fast-growing, well-established companies like Wine & Design and Painting with a Twist could be your next investment. Think this concept would do well in your city?
Commercial Cleaning Services
As a new business owner, a commercial cleaning service is a great option you may have not thought about. These services work with other businesses, schools, churches, medical facilities, and more. Servpro is a great option if you want to direct your attention on businesses. Merry Maids serve personal residences, so this could be the option for you if you want to cater to personal residences.
Rental properties have been in high demand for several years and property owners like leaving the management of these rentals to other people. Property Management Pros and Real Property Management are franchises that provide these services. As the need for property managers increases, there is room for growth and more investors.
Spa and Beauty Services
Self-care has become a priority for many especially after all the time stuck at home in the last few years. Buying into franchises like Massage Envy and Hand & Stone allows you to offer specialized treatments such as massages, facials, and waxing, or choose to go bigger and offer full-service treatments that include fun add-ons to personalize your clients’ experience.
The baby boomer generation is aging and requiring facility and in-home care, and this field is finding a way to be more innovative and involved, now providing placement and advocacy services. Available franchises include Home Helpers, Caring Senior Service, and Visiting Angels.
Vending machines are everywhere, and they have been for years, but how successful these machines are and the variety of products they offer, has made franchising them a decent option. Vending franchises like IceBorn, Healthy You Vending, and HUMAN are options you might consider if investing in a vending machine business.
Ready for your franchise business venture? Aaron Bakken Franchise Consulting Company can help you decide which franchise best suits your interests.
Contact Aaron (608-576-4592) for a Free Consultation!
About Aaron Bakken
Franchise Consultant for The Franchise Consulting Company
Aaron has 20+ years of franchise and independent business ownership experience. He also spent 5 years as the VP of Franchise Development for an international franchise group, growing the franchise to the advent of a private equity buyout. Whether you are looking to buy a franchise opportunity or franchise your business, Aaron knows how to guide you.
No Cost To You
Aaron is paid by franchisors and development companies for bringing them viable franchise investors. So frankly, his clients have nothing to lose by engaging with him but a bit of their time. Aaron helps his clients navigate the complex world of franchise ownership and development and provides long term guidance to help his clients achieve their entrepreneurship goals.