Opening a franchise can be a rewarding experience, but there’s a lot that can go wrong. Here are the seven steps you can take to open a franchise business.
Do your homework
It’s crucial to find a franchise with a proven business model. It’s a good idea to look for franchises that have been operating successfully for at least three years. You can use a website like FranchiseGator to search for franchises across different industries and income requirements.
Once you’ve found a franchise opportunity that sounds interesting, you’ll want to learn all about the regulations and policies that come with it. And you should see what the requirements are to register your franchise business with the state.
Decide what type of franchise you’ll open
There are many different franchise opportunities available, so you want to find the one that interests you. For instance, you could invest in franchise convenience stores, travel agencies, health establishments and food trucks.
Spend some time thinking about the kind of business you want to run and the type of lifestyle you want to live. From there, you can look for opportunities that match.
[Read more: How to Choose the Right Franchise Business]
Attend Discovery Day
After you’ve chosen a franchise, you’ll attend a Discovery Day. This all-day event is an opportunity to learn more about the company you’re partnering with.
However, it’s also a chance for the franchisor to decide whether or not they want to have you as a business partner. They’ll evaluate you based on cultural fit, experience and whether you seem committed to the opportunity. After Discovery Day, the franchisor will let you know whether they want to work with you.
Review the franchise agreement
If the franchisor decides to do business with you, they’ll give you a franchise agreement to sign. Read through everything to ensure the information in the contract matches what the franchisor told you.
If the franchisor promised you something that’s not in the agreement, you’ll want to bring this up immediately. Once you sign the franchise agreement, you can’t go back and change anything.
After you’ve chosen a franchise, you’ll attend a Discovery Day. This all-day event is an opportunity to learn more about the company you’re partnering with.
Decide whether you’ll buy or lease the location
You’ll also need to decide whether you’ll buy or lease the franchise location. If you choose to rent the location, you’ll have more flexibility and will have to pay less money upfront.
However, if you see yourself staying in that location for several years, it may be more financially beneficial to buy the location. Regardless of which option you choose, make sure to check out the surrounding area for things like safety and accessibility.
Apply for small business funding
Before you sign your franchise agreement, you’ll need to know that you can cover the franchise costs. Here are a few small business funding options you can consider:
- SBA loan: The Small Business Association guarantees SBA loans, so these loans come with low interest rates. However, the application process is notoriously difficult, and new business owners aren’t always accepted.
- Bank loan: Traditional bank loans also come with low rates, but you’ll need to show that you have experience and a solid business plan. If you already have a relationship with a local bank, it may be a good idea to start there.
- Rollover for Business Startups (ROBS): A Rollover for Business Startups (ROBS) lets you use your retirement savings to cover the franchise costs, and you don’t have to pay any early withdrawal fees. Using a ROBS can be faster than applying for a loan.
[Read more: Startup 2021: Financing Options for Your Business]
Prepare for opening day
On opening day, you’ll launch your business, and you want to promote the event as much as possible. Share the details on social media, and invite members of your community to your opening day celebration. Your local Chamber of Commerce can connect you to networking groups so you can spread the word within the business community.
[Read more: 8 Small Business Organizations for Entrepreneurs Looking to Network]
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