While these 10 steps are certainly not an exhaustive list, they do give a good idea of what needs to get done to start pursuing franchise ownership.
Step 1) Self Evaluation
The first thing you have to do in your journey to opening a franchise is self-evaluation. Unfortunately, most people rush past this most critical step. This would include things like:
- taking a serious inventory of the skills and experiences you bring to the table
- assessing what financial and time resources you are prepared to allocate to the business
- determining what kind of family support you have
- resolving whether you can commit to following pre-determined business methods
Self-evaluation means taking serious a look at as many of your circumstances as possible. If you are willing to put in the work and long hours that are required when starting a franchise business, you are well on your way to successfully owning a franchise.
Step 2) Find An Experienced Franchise Consultant
Once you have self-evaluated and determined your reasons for buying a franchise, ask an experienced Franchise consultant for assistance to guide you through the process. Franchise Consultants will build on the self-evaluation you’ve done in order to help you gain absolute clarity on what your ideal business model should be. Once that is defined, they will then introduce you to only those businesses that are a reasonable match to your ideal model. One of a franchise consultant’s primary roles is to help you understand the many nuances and complexities of researching and opening a franchise business.
Step 3) Do Your Research – Understand The Franchisor’s Business Model
After you have contacted a franchise consultant, do your research! Talk to the franchisors to learn what the business model is from their perspective. Find out what kind of business you’re interested in opening; find out why the franchisor feels there is a demand for such a franchise in your area.
Step 4) Do More Research – Talk To Existing Franchisees
You absolutely need to speak to enough existing franchisees (we recommend talking to at least 10 to 12) for the system you’re considering! They are able to give you the best insight as to what truly happens within their franchise system, good or bad. For a complete list of questions to consider, please review our detailed list of questions in our Q&A section. This can give you a genuine insight into what to expect when you open the franchise yourself.
Step 5) Gut-check time – Meet The Franchisor’s Team Face-To-Face At A Discovery Day
If you’ve made it this far, you should now be 2 to 3 months into your research and you should be very close to making a buying decision. You should have a thorough understanding of the business model, the value proposition that you’ll be providing, the resources required to acquire and launch the business, the staffing you’ll need to hire, the marketing of need to do, etc. Most importantly though, you should have high confidence that you can and will be able to perform the required functions that drive success in the business. Before you make the final buying decision though, we highly recommend that you visit the franchisor’s head office and meet with the senior leadership team to ensure that there is a strong “culture fit”. After all, you’ll be relying on this team for the next 5 to 10 years at a minimum.
Step 6) Secure Funding for Your Business!
There are numerous financing options for you to consider, but remember, you will need enough financial reserves to cover any and every expense that will turn up until the business begins to turn a profit. It is often said that the number one reason why businesses fail is undercapitalization, so here is the critical components you need to secure funding for:
- total initial set-up investment (franchise fee, construction build-out, inventory, equipment and supplies, vehicles, etc.)
- business working capital – this is almost always underestimated. Business working capital is the amount of funds you will have to borrow or personally inject into the business until the business achieves breakeven (the point where revenues and resulting profits offset ongoing expenses)
- personal working capital – most people fail to consider this. While you are in the launch phase of your business, you will likely not be drawing a salary or wages from the business, but you will likely still be responsible to some degree for the monthly living expenses for you and your family. It is important that you include this amount as part of your initial investment
Step 7) Professional Review
Just before you sign the agreement, seek counsel from a FRANCHISE lawyer – somebody who has demonstrated experience in the franchise industry. Their role is to help you understand your rights and obligations as well as the franchisor’s rights and obligations. They will also identify any concerns or risks that might be unique to the franchise system you’re considering.
Step 8) Signing the Franchise Agreement
Once you have completed your legal review, there’s only one thing left to do and that is to sign the agreement and pay the franchise fee. Once you’ve done this, your immediate next steps are to make sure you obtain all the necessary permits and insurances that you need to operate the business system (each franchisor should give you specific instructions and guidance regarding what’s required for their system).
Step 9) Location, Location, Location
If your business is location-based, it is critical that you find a suitable location. You will need to figure out the optimum location for the franchise you want to open in order to have maximum impact. Remember, franchisors usually assist with site selection to varying degrees so you’ll want to understand just how much location assistance the franchisor you’re considering is going to provide. (Please note: some franchisors will perform real estate selection prior to signing the franchise agreement)
Step 10) Follow The System!
Each franchise has its own recommended systems and processes so it’s critical that you follow the process you just paid so much money to acquire! Attend the franchisor’s training and hire the staff you need to, as per the franchisor’s instructions. Franchisors often have defined process for initial marketing and grand opening advertising, so you will also want to adhere closely to their proven strategies.
When you have done all of this, you are ready to open your franchise business!