Deciding to buy a franchise is a big step. There are so many details that must be worked out before you take the leap into starting a business of any kind.
First you need to determine whether you want an online or offline franchise. Then you need to review the many options that are available and decide which one you want to pursue. You also have to arrange for funding, set it up, and start running it—all while keeping enough cash on hand to stay afloat until it makes a profit.
This step by step process will help you figure out if this sounds like something you want to do.
First it’s important to understand exactly what a franchise is. When you decide to buy a franchise, you pay an upfront fee to set up the business and use the nationally recognized name.
Then you pay a portion of your profits to the company which owns the franchise name. Many people discover that this is an excellent way to make money because they can capitalize on a name that’s already recognized by customers.
Before you decide to start a franchise, you have to determine what kind of business you want. Many online resources publish lists of lucrative work from home franchises. Servpro is at the top of the list, and it focuses on insurance or disaster restoration and cleaning.
If you want to buy a franchise that has a brick and mortar location, then some options might include Subway, CleanNet USA, H & R Block, and Dunkin’ Donuts, all of which recently made Entrepreneur’s list of fastest growing franchises. Tide Dry Cleaning franchise is another possibility, and it’s one of the newest ones available.
As with any kind of business, deciding to buy a franchise comes with its risks and rewards. Probably the main risk of starting both an online and offline franchise is not being able to turn a profit. However if you are quite business savvy, then that risk may not be much compared to the reward of the possible profit you may be able to turn.
If you’re running a franchise with a brick and mortar location, you face a slightly increased risk of location-specific injuries and potential lawsuits or workman’s compensation claims. It will be up to you to carry the appropriate insurance to protect yourself and your business.
It is certainly easier to hire people to work for you if you have a brick and mortar location. Besides, if you select a good location, then “traffic”, the lifeblood of your business, will be easier to get. Although, online traffic is just as important nowadays for almost any type of business be it offline or online.
Marketing is key to your success, especially if you don’t have a physical location and work only out of your home. This one aspect of the business could easily spin your expenses out of control you don’t have much of a marketing background. Of course, by deciding to buy a franchise, you can benefit from the recognized name that you buy into to garner business and secure the trust of customers. In spite of this, advertising could cause your business to die before it even begins if you mismanage it.
A well thought out business plan could help you better understand the costs involved and other risks you might be facing. This is a step you don’t want to ignore even if you’re not starting a business from scratch and just buying into an already existing system – a franchise.
The amount of money you will pay to start a franchise depends entirely on which franchise you choose. On the low end, you’ve got for instance, H & R Block, which carries startup costs roughly between $30K and $140K, as of recently. A Stratus Building Solutions franchise can be started for between $3K and $57K. You can start a CruiseOne franchise for between $4K and $26K.
The franchise fees you’ll pay can be as little $500 or as much as $10,000. On the other hand if you want to go with a major franchise like McDonald’s, the company requires you to have at least $750,000 of your own money (not a loan) on hand before it will even consider you for a franchise.
Before you decide to buy a franchise, it’s also important to think about how much time you are willing to put in. If you have plenty of money lying around, you could start a franchise and hire people to do everything for you. This would require very little of your own time after it’s in operation, although you can expect to put in at least 80 hours or more on the startup end of the operation.
If you’re running a cleaning business or something similar where you do most of the work yourself, you can do as much or as little as you want. Online franchises tend to be the same way.
When you do decide to buy a franchise, keep in mind that usually you will have to apply before you will be granted the rights to use the name. Franchises aren’t going to trust their name to just anyone, so be prepared for the application process, which varies from franchise to franchise.