Starting a business is no easy feat. It’s probably why so many aspiring entrepreneurs look for opportunities to own a franchise.
Purchasing a franchise means you’re buying into a proven business model. In other words, you become immediately associated with a recognized brand name, an established customer base and ongoing support and mentorship from the franchisor.
Here’s the problem: Becoming a franchise owner isn’t as simple as walking into a branch of your favorite franchise and simply signing up. There are a few important actions you need to take to go from aspiring entrepreneur to successful franchisee.
Not sure where to begin? We outlined nine steps below to get you started.
Related: Considering franchise ownership? Get started now and take this quiz to find your personalized list of franchises that match your lifestyle, interests and budget.
1. What’s your budget?
Franchises don’t come cheap, especially when you factor in the necessary franchisee fees and ongoing expenses.
Franchise fees can range from a few thousand to several hundred thousand dollars, depending on the brand and industry. Other expenses — such as rent, inventory, marketing and employee salaries — contribute to the initial and ongoing costs, so be sure to set your budget accordingly.
So how much money are you comfortably willing to spend? Consider your personal finances and any loans or investments you may need to make before you get a franchise up and running.
Related: 6 Questions to Ask Before You Begin Your Franchise Search.
2. What industry suits you best?
Once you’ve determined your budget range, it’s time to start thinking about what type of franchise you’d like to own and operate.
Franchises are available in nearly every industry, from fast food to fitness to tutoring services. What are your interests? Do you have experience or skills in a specific industry?
You’ll want to choose an industry that both aligns with your passions and strengths and has a successful track record.
3. Research potential franchisors
You started broad — maybe you chose one or two industries to explore. Now it’s time to narrow your list to a few franchise options.
Look for established, reputable brands and consider factors such as the franchisor’s financial stability, the number of franchisees in the system and the level of ongoing support and training offered.
A good place to start your research is online. Look at company websites, review sites and recent news articles to get a better feel for the franchise you’re hoping to buy.
Related: Busting Franchising Myths and Choosing the Right Opportunity
4. Use Discovery Day to your advantage
Many franchisors host in-person events to give potential franchisees a deeper look at their business model, operations and support structure.
Also known as “Discovery Day,” you’ll typically meet with franchisor representatives as well as tour locations and learn more about the day-to-day operations of the business.
Be sure to ask plenty of questions and take detailed notes to see if you and the franchisor are a good fit for each other.
5. Don’t be shy to speak with current franchisees
Don’t be intimidated by other franchisees. In reality, other franchisees are an integral resource when deciding if a certain franchise is right for you.
Most franchisors will provide a reference list of current franchisees for you to speak with — or you can take it upon yourself to talk to other franchisees independently via online directories or local branches.
When speaking with current franchisees, be sure to ask about their experiences with the franchisor, the level of support they’ve received and any challenges they’ve faced.
You should also inquire about their financial performance and whether they believe they’ve received a good return on their investment.
Related: Everything You Need to Know About Franchise Law.
6. Review the Franchise Disclosure Document (FDD)
Another useful resource for researching franchisors is the Franchise Disclosure Document (FDD).
The FDD is a legal document that franchisors are required to provide to potential franchisees. It includes detailed information about the franchisor’s history, financial performance, franchise fees and royalties and any additional information you may need to know about the franchise opportunity.
The franchise must share the FDD with you at least 14 days before any contracts are signed, giving you enough time to review it with professional and legal guidance.
7. Evaluate and analyze the franchise agreement
The franchhise agreement is a legal contract between you and the franchisor that outlines the terms and conditions of the franchise relationship. It’s helpful to review this with a legal professional.
Pay close attention to key provisions, such as fees and royalties, territorial rights and obligations for ongoing support and training. Should you have any questions or concerns about the agreement, hold off on signing and address them with the franchisor.
Related: 10 Tips to Go From Employee to Boss, From Franchisees Who Did It
8. Secure funding
Remember the budget you set? It’s time to finalize your funding. Depending on your budget and the franchise you’ve chosen, you may need to secure financing through a traditional loan, with investors or directly with the franchisor.
9. Launch your franchise
Besides requiring money, franchising demands a significant amount of time, especially in the early stages. You’ll need to hire and train employees, establish processes and procedures and manage day-to-day operations.
But if you’ve chosen a franchise concept you believe in, you’ll likely want to spend as much time as needed ensuring it becomes an all-out success.
Related: Is Franchising Right For You? Ask Yourself These 9 Questions to Find Out.