For a first time business owner, the idea of buying into a franchise is exciting. It is the first step in becoming your own boss in a field you are actually passionate about. And when it comes to franchising, you can literally be in any industry you want. Whether you are interested in industries like the cleaning industry or the education industry, there are ample opportunities for you.
But before you buy into a franchise, there are things you need to know and do to get prepared. Everything from doing your research to making sure your finances are stable can help make sure you are ready. So, if you are buying into a franchise for the first time, you’ve come to the right place! Here is the only guide you’ll need as a first time business owner!
What Exactly Is A Franchise And Why Should You Buy Into One?
A franchise is an arrangement where you – the franchisee – buy the right to use the name and business model of a business and sell their products or services. A good example – and a business we all know – would be McDonalds. And while the food industry is a great industry for a franchise, it doesn’t stop there. No matter what industry you want to be in, you will find franchising opportunities.
In fact, according to reports from Statista, there were an estimated 806,270 franchises in the United States that valued at approximately $859 billion in 2023. And if those numbers don’t entice you to buy into a franchise, keep in mind that you also aren’t having to start from scratch. Your franchisor is always there to back you up – even financially – and offer you support. Plus, with a franchise you are able to be your own boss.
Tips To Prepare Yourself As A First Time Business Owner
Now that you know what a franchise is and why you should buy into one, you’ll need some tips to help you prepare as a first time business owner. With the right tips in hand, you can confidently buy into a franchise and feel a lot less stressed about getting started. So, if the idea of buying into a franchise is stressing you out or seems daunting, here are a few tips to help make things much easier for you.
Do Your Research And Talk To Franchisors
The first thing a first time business owner needs to do is research. Doing research is vital if you want to make sure you are choosing the right industry and company for you. While there is a franchise in every industry, you still have to make sure you are in the right industry for you. This means taking a look at what you feel is needed in your area. Maybe there is a lack of burger places where you live or maybe there are homes that need a cleaning business. Whatever the need is, that is a good industry to look at.
You also need to keep in mind what kind of franchises are out there. Did you know you can actually speak to prospective franchisors before ever signing anything? You can even check out franchising events like the International Franchise Expo where there are over 300 franchises ready to talk to you.
Take A Look At The Financial Requirements
Once you’ve chosen your industry and prospective franchise, the next thing you have to do is look at your financial requirements for the franchise. This means knowing what the franchise fee, the royalty fees, and any other fees are going to be once you sign the agreement. Knowing this will allow you to come up with a good budgeting plan so you can make sure you’ll be able to handle these fees on time.
Remember that some of these fees are reoccurring and some are a one-time payment. The franchise fee is one of those one-time payments you’ll have and can range anywhere from $20,000-$50,000. This would also be a good time to look into what financial help is available. This includes looking into Small Business Administration (SBA) loans for franchisees.
Look At Franchise Disclosure Document And Agreement
One thing you should know as a first time business owner is that any prospective franchisor needs to provide you with a franchise disclosure document (FDD) at least 14 days before you sign any agreement. This document details important information about the franchisor and the business. You’ll find things like the estimated start-up costs, the franchisor’s history, and so on. You can ask the franchisor for this document and you can also go online to sites like FRANdata to browse a bunch of FDDs from different franchises.
And once a deal has been made, the next document you will deal with is the agreement. Make sure to look over this agreement carefully so you can be sure it details everything as it is supposed to. This form details all the responsibilities you and the franchisor have, so it is important you give it a good look. You might even want to have a franchise lawyer look over it before you sign.
Come Up With A Business Plan
Once you’ve signed the franchise agreement, the next thing you’ll want to do as a first time business owner is come up with a business plan. While you are going to use the business model set up by your franchisor, that doesn’t mean you shouldn’t have a plan in place that you come up with. This plan will help keep your goals in order and make sure you aren’t going down a bad path with your business.
Your franchise business plan should include topics such as your mission and vision statements, a company description, your market research, and your financial projections. Talk to your franchisor if you are in need of market research, marketing plan, or financial projections since your franchisor has more than likely already done this research when they first set up the business.
Choose Your Location And Set Up
When you’ve signed your agreement, the final thing you need to do is find the right location and set everything up. Finding the right location is vital because you want to make sure you choose a location that will benefit from your business. Your market research will come in handy with this because you will be able to tell where your target audience is located. Keep in mind that some franchisors do require you be in certain locations, so talk to your franchisor before you finalize anything.
Besides finding the right location, you will have to find out from your franchisor if there are any trainings or certifications you must get. Depending on the industry you are in, there might be specific things you need before you can start selling products or services. Your franchisor might even be willing to fund you for any trainings you have to take, so make sure you discuss all of this with them.
Launch Your Franchise As A First Time Business Owner!
Now that you have these tips, you are all set to get started with your new franchise! Congratulations first-time business owner, you are now your own boss. You should now take advantage of social media and word-of-mouth as advertising and make sure you are keeping up with the industry trends to help you best market your business.
And if you are hiring employees – versus you just doing the work yourself – make sure they are also following your business plan and have gotten the right kind of training and certifications that they may need. With diligent work, patience, and this guide to help you out, you can make sure the business is profitable for you in no time!
