A franchise is, in simple terms, a licensing relationship. A company like Baskins or Starbucks usually operates this way by licensing its brand and using systems for interested individuals. As such, the company gives you the right to sell its products, and in turn, you agree to pay a certain percentage of fees upfront and follow their conditions and guidelines.
Examples of franchises are:
- Petrol kiosks
- Fast food restaurants
- Coffee houses
A franchise business based on a passive income stream can suit most people as it will depend primarily on the individual on how long and often they want to invest their time and effort into it. As such, one can balance their lifestyle and commitments to suit the needs of the franchise system. For example, one passive income franchise known as Xpresso Delight has over 150 franchisees, and the operators are anywhere between 20 to 60 years of age.
Here is how to own a franchise in ten steps:
Step 1: Do your franchise research.
A franchise enables you to buy into a proven business model in the marketplace. Starting a new business can be expensive, but your capital may not be extremely high with franchises because you won’t start from scratch.
Franchises come with a business plan, marketing, training for staff and readily available branding. Franchisors want their franchisees to succeed. Naturally, there will be services such as advertising, business advice and training.
Step 2: Choose a franchise that suits your needs.
The question of what franchise suits you also depends on how much money can be potentially earned. It also depends on the industry that particular franchisee is in. As such, here is a list of various franchises, showing their required investment and their respective net worth:
7-Eleven
- Description: Convenience store
- Type of Business: Brick and mortar
- Minimum investment Required: $34,550
- Net-worth Requirement: $100,000
- Franchise Fee: $10,000
- Royalty Fee: none, profit sharing
Planet Fitness
- Description: Gym and fitness facility focusing on occasional or first-time gym users
- Type of Business: Brick and mortar
- Minimum investment Required: $728,000
- Net-worth Requirement: $3,000,000
- Franchise Fee: $10,000
- Royalty Fee: 5%
Dunkin Doughnuts
- Category: Food & Drink Franchise
- Franchise fee: $40,000 to $90,000
- Initial investment: $109,700 to $1,637,700
Kumon Math & Reading Centers
- Category: Children’s Education Franchise
- Franchise fee: $1,000
- Initial investment: $74,428 – $156,590
Step 3: Form an LLC or corporation.
Many franchisors prefer to work with an LLC or corporation. Incorporating your business enables you to have a legal barrier between your assets and business liabilities. You can also qualify for tax breaks.
Step 4: Get market insight and franchise opportunities.
You also want to understand your local market conditions. Get a feel of the kind of business that can succeed in your area. You also want some data to help guide you make business decisions.
If researching on your own isn’t your cup of tea, you can also hire a franchising consultant who can help you get all the data and marketing insights you need and help you choose the best franchise that suits your needs.
Step 5: Write a business plan.
Business plans help you create your goals for each business year and a roadmap to help you reach these goals once you have your chosen franchise; right your business plan so you can pitch it to your investors.
Step 6: Obtain franchise financing.
Depending on your choice of the franchise, the starting capital you will need depends on what you need to cover ass part of your franchise. This includes franchise fees, start-up costs, and working capital to get you through the first phase of your franchise journey.
Step 7: Review and sign the franchise agreement.
If you hired a franchise consultant, get them to go over the franchise agreement to ensure it covers all the needed elements. You should also hire a franchise lawyer to review the contract before signing it with our franchisor.
Step 8: Keep in mind the related compliance requirements.
Different states will have additional requirements regarding various licenses and permits. These include general business licenses, tax registrations, health permits, and occupational licenses.
To avoid hefty fees and fines, you must ensure all the necessary licenses and permits before opening day.
Step 9: Attend, train, build and improve your franchise.
Franchisors often provide various training sessions and seminars to ensure their franchisees continue to implement the critical elements of the brand, from blueprints, custom fixtures and signage, and the level of customer service.
Take as much training and attend as many seminars as possible for you and your employees to be ready for opening day.
Step 10: Open your new franchise.
Once you have all the elements in place for your franchise, it’s time for opening day. Here is another advantage of being a franchisee- your franchisor will already have a guideline and templates to help you market and advertise your business in your local area.
