Some people tend to prefer the franchise business model as opposed to starting from scratch. Some of the common benefits of a franchising include marketing and operational support, brand equity and a proven track record.
Nonetheless, it is up to you to carry your research and due diligence on the prospective franchisor. The following are important steps that will get you started with franchising:
1. Conduct proper research
The first thing you need to do before opening a franchise is to learn about franchising as a whole. Look for vital information such as how franchising works, what you should expect and how to choose the best franchise company to work with.
After conducting your research, it is time to choose a franchise company that suits your needs. The following are some of the things you need to bear in mind while choosing a franchise:
•Cost or price of the franchise – You should find out what is the overall cost of the franchise including things such as franchise fees, training expenses, property, equipment among others.
•Personal preference – You should be able to decide what type of franchise you would like to start.
•Internal policies/guidelines – Also find out about the internal policies and regulations of the franchise.
Franchise disclosure statement
After you have decided which franchise to start and let them know, you will be given a Franchise Disclosure Document. The document which is also referred to as Uniform Franchise Offering Circular (UFOC) gives an outline of the franchise fees, rules, responsibilities and any other important information regarding the business.
2. Attend discovery day
Upon choosing a franchise company, they will invite you for a personal meet-up. This will be an opportunity for you to interact with the franchise company and understand its culture, values, and policies. On the other hand, the franchise company will also use that opportunity to know you and your intentions better.
It will also be a day you will know whether the franchise company is going to work with you or not. The decision to accept your request will depend on several factors. For example, some franchisers will look at the educational qualification, trade certifications, your financial capability among others.
3. Review your franchise agreement
Assuming that all goes well after the discovery day, the franchisor will give you a franchise agreement – a formal agreement that gives you legal rights to start the franchise. The agreement usually has a long list of rules and demands that you are supposed to follow. It is important to consult a lawyer with franchise experience to assist you with the franchise agreement.
Go through the agreement and see if what is in the document tallies with what the franchisor told you during the meeting. For instance, if the franchisor promised legal support in case of a lawsuit, ensure that part is captured on the franchise agreement. The same applies to the rules relating to pricing, suppliers, transfer of ownership, royalty fee, hiring of staff, training among other things.
4. Get the right funding for your franchise business
Wait! Before signing the contract agreement be sure that you have adequate funds for the franchise. Most franchisors expect franchise fees to be sent together with the signed contract. This means that you should first secure funds to pay for the franchise as well as cater for the initial operations.
5. Pay close attention to business compliance requirements
Most states require that you obtain various business licenses before you can start operating within their jurisdiction. For example, you will need a health permit, general business license, tax registration certificate among others.
It is therefore important to ensure that you have all these things in place before you start operating your franchise business.
In a nutshell, franchising is a great idea for entrepreneurs who don’t prefer starting a business from scratch. Franchising has a lot of benefits such as marketing & branding support from the franchisor, proven record, brand equity among other benefits.
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