If you are thinking of starting a franchise, you may be thinking of becoming a franchisee. This means that you want to become a small business owner with a franchise under a large company.
As you probably know, a franchise is a business model and a brand — and when you become a franchisor, or franchisee, you sign a franchise contract and spend a lot of money on the rights to use that business model and brand.
Recently, franchise brands are all over the place. If you have a favorite coffee shop you can visit in cities across the country or the world, it’s almost certainly called a franchise. In other words, instead of being owned by a company, individuals own and operate one or two or more of these coffee shops.
What is the Meaning of Franchising?
In franchising, one business (called a franchisee) pays another (the franchisor) to use the franchisor’s business model and trademark. Franchisors offer a wide range of assistance to franchisees, such as business training, support services, and advertising.
There’s an opinion that buying a franchise allows you to work for yourself, but not alone. You may be the boss of the franchise, but the franchisor provides you with ready-made templates for your new business to follow. Using those templates simplifies the process of starting and growing your business.
The steps for starting a franchise business:
Know your budget.
There is always an upfront franchise fee, and franchisors often have financial terms as to who they will allow to open one of their franchises. Examine your personal finances and assets, so you can start looking for opportunities that fit your price range.
Do your research.
For example, the franchisee of café coffee must have a net worth of 600,000 dollars. If that’s not where you’re financially located, look elsewhere. You don’t want to waste time dreaming up your plans to open a particular franchise, only to look at the fine print and realize that it doesn’t fit.
Look for other franchisors and franchisees. You want as much detail and hands-on information on what it’s like to run this franchise.
Usually, the franchisor and franchisee will go through an interview process. This could take the form of conference calls, visits to their headquarters, and sit-down meetings. This will vary, depending on which franchisor you choose, but the goal is for you and the franchisor to discuss the specifics and determine whether a franchise is right for you. Note things like how much support the franchisor offers during setup, and whether they provide ongoing training.
Sign a franchise agreement, and make your investments. There is an upfront fee paid to the franchisor, and usually additional investment costs such as kitchen or cleaning equipment. This is where it all began.
If all goes well, renew your franchise agreement when it expires, in order to continue ownership of your business. Usually, this agreement is five to ten years in duration.
