You’re ready to start your own business, but you’re not interested in building a concept from the ground up. So instead, you’ve settled on buying a franchise. After all, it’s no secret that franchising can be a great alternative to starting a business from scratch.
With so many options traversing several industries, how can you know that you’ve made the right choice for you and your lifestyle?
A good place to start is with this checklist. From financing to legal review, we’ll cover all the basics before you officially become a franchisee.
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.
Reflect on what kind of business model you would enjoy
Franchisors might require different types of leaders, so the franchise you choose must align with your preferred style of conducting business. Do you want to be hands-on and involved in the day-to-day operations and decisions? Or perhaps you would prefer to be hands-off and hire a team to run the business for you? Or would you like to own multiple franchise units and oversee a team of managers?
Consider this the last call to take your strengths and preferences into account before choosing the right franchise for you.
Establish your budget
Before you start making phone calls and submitting applications for a specific franchise, you’ll need to identify a realistic budget. Franchise costs can vary greatly depending on the brand and industry, so it’s important to consider what you can comfortably afford or finance.
Take into account the initial franchise fee, ongoing royalties, brick-and-mortar costs, technology expenses and any other costs associated with starting, running and promoting the franchise of your choice.
Apply for franchise ownership to see if you qualify
Up to this point, you’ve done your research, talked to potential franchise options and identified your realistic budget. Now it’s time to apply for franchise ownership.
Most franchises have a screening process to review your financials and to assess if you will fit with the brand. You should be prepared to share information about your work experience, background and career goals to ensure you’re a good match.
Review the FDD, talk to franchise owners and run the numbers
Before making a final decision, it’s important to do your due diligence. This includes reviewing the Franchise Disclosure Document (FDD) with a franchise lawyer, talking to current and former franchise owners within your selected franchise and crunching the numbers to ensure the franchise is a financially viable investment for you.
Go to “Discovery Day” at the franchise’s headquarters
Many franchises offer a “Discovery Day,” where potential franchisees can visit the headquarters, meet the leadership team and learn more about the brand through various presentations and workshops.
This is a great opportunity to get a feel for the company culture and see if you and the franchise are a good fit for each other.
Explore financing options
If you need financing to get your franchise up and running, there are several options to consider. You could use personal savings or raise capital from family members, obtain a business loan from a bank or other financial institution or apply for a government-backed loan, such as a Small Business Administration (SBA) loan.
Some franchises also offer franchising options, which can include deferred payments or lower interest rates. Do your research and see which is best for you.
Seal the deal
You’ve done the research, secured the financing and chosen the franchise that is right for you. Now it is time to sign on the dotted line. Sealing the deal is usually done by signing the franchise agreement, which highlights the roles and responsibilities of you and the franchisor, fees, advertising, training and more.
Once signed, you will typically start training and be on your way to opening your franchise doors.