Kody Wirth is a content writer and SEO specialist for Palo Alto Software—the creator's of Bplans and LivePlan. He has 3+ years experience covering small business topics and runs a part-time content writing service in his spare time.
9 min. read
Updated January 5, 2024
Franchising offers a pathway to business ownership that takes advantage of a proven idea and strong brand. You lose some autonomy and control—but get to work from an established playbook, learn from a successful franchisor, and, most notably not have to start a business from scratch.
So, is becoming a franchisee the best way to start a business?
Learn how to choose and start a franchise that fits your interests.
A franchise is a business owned by an individual (franchisee) but branded and supervised by a larger company (franchisor). Common examples include Subway, 7-11, and Hilton Hotels.
Purchasing a franchise grants you the right to use a tested business model, pricing, products, and marketing strategies.
Additionally, franchisees gain access to the company’s trademarked materials like logos and slogans—essential for establishing a brand identity.
There is always an upfront franchise fee, and franchisors often have financial requirements for potential franchisees. For example, some franchisors require franchisees to have a particular net worth.
Review your finances and assets to look for opportunities in line with your price range. Determine how you’ll finance the franchise, whether through personal savings, bank loans, or franchisor financing options.
You don’t want to waste time dreaming up your plans to open a specific franchise only to look at the fine print and realize it’s not a good fit.
For example: A Cafe Yumm franchisee must have a net worth of $500,000. If that isn’t where you’re at financially, look elsewhere.
Contact a current franchisee to learn more about the business if you can. What are their perceived pros and cons? What’s it like working with this brand? Are there any significant costs associated with this franchise?
Additionally, you need to check if a franchise is already running in your area. If so, the franchiser may be unlikely to approve another location in such close proximity.
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A unique aspect of starting a franchise is that it’s not entirely up to you. You have to interview, almost like you’re applying for a job.
The format will depend on which franchiser you choose. The goal will be for you and the franchisor to review the specifics and determine if the franchise is right for you.
Take note of how much support the franchisors offer during setup and if they provide ongoing training.
A benefit of starting a franchise is that many important aspects are well-established. However, you still need a business plan to cover how you will run your business, forecast sales and expenses, and outline employee needs.
Most importantly, you need a thorough market analysis that shows how this franchise will work in your local market. At a minimum, you need to detail who your target customers are and how they relate to or differ from the current franchise customer base. Luckily, most franchises offer assistance with this part of the process.
Check out our business planning hub to learn more about writing a franchise business plan.
Selecting a location can be complicated by specific requirements from the franchise owner. Size, setup, and even the atmosphere surrounding the business may limit your options.
Then, you must consider if the location makes sense from a performance standpoint.
Hopefully, the franchisor will assist in this process. If not, check out our complete guide on selecting a business location for more specific steps.
Before you sign a binding contract outlining mutual obligations between you and the franchisor—you need to review the Franchise Disclosure Document (FDD) document.
The FDD contains a wealth of information, including:
Before signing the FDD, review it carefully, preferably with the help of a lawyer.
Aside from the franchise agreement and FDD, additional legal requirements exist to start your franchise.
Most franchisors provide training programs for new franchisees that cover everything from business operations to customer service.
However, this initial training may not cover everything, and franchisors may update their policies, marketing strategies, or product offerings.
Staying aligned with these changes ensures brand consistency and can impact the franchise’s success.
If you’re reading this, you’re likely more interested in opening a franchise than starting a new business. To be sure of your decision, let’s weigh the pros and cons of both options.
Choosing the right franchise can be as challenging as developing a good business idea. Simplify the process and use these seven factors to help vet and select the right franchise.
Franchising spans a wide range of industries. While there are countless specific franchise concepts—you can group them into several common categories:
Establishments that prepare and serve meals and drinks, ranging from quick-service to full-service dining.
Businesses that sell goods directly to consumers from physical locations offering a variety of tangible products.
Franchises providing specialized services to individuals or businesses—emphasizing expertise or personalized care.
Franchises that cater to other businesses, offering services that enhance business operations or efficiency.
Operate in the property market, assisting in buying, selling, or leasing properties, with a focus on market expertise.
Franchises that provide accommodations for travelers, including hotels and motels, emphasizing comfort and amenities.
Focus on enhancing appearance and well-being, offering services like grooming, beauty treatments, and wellness.
Centered around leisure and entertainment, providing venues or services for relaxation and fitness.
Cater to niche markets or unique services not covered in other categories, such as specific demographics or specialized needs.
It can be quite challenging to choose a franchise since there are over 3,000 different concepts available.
How do you narrow it down to one? Here are three tips:
While you’re not coming up with a business idea, you can still use the same tactics to identify a winning franchise opportunity. The easiest place to start is by identifying and listing out your skills, strengths, and passions.
Maybe you’re a relationship-builder, an operations expert, or already have experience working with a franchise.
If you’re struggling to identify what you’re good at, consider conducting a SWOT analysis on yourself. This will give you a structured way to assess your strengths, weaknesses, opportunities, and threats.
Use your skills as a reference when exploring franchise opportunities. Remember, you must be a good match for the franchise owner.
Having industry-specific experience or skills can help sell them on your ability to run their specific type of business.
For instance, if you’re drawn to a commercial cleaning franchise because it’s B2B and aligns with your sales skills.
Be vigilant about consumer and business trends to ensure your franchise choice is relevant.
Take note of popular opportunities, but don’t jump on them immediately. Do your due diligence and determine if the franchise trend is sustainable and not a fleeting fad.
As always, fall back on market research to understand consumer spending habits. If the franchise category you’re interested in shows customers straying away from known brands—it may not be the right time to jump in.
Cooking up a brand new business idea has its value, but there’s no reason you can’t piggyback on a time-tested method and reap the benefits—as many franchisees are already doing today.
If you’re interested in buying a franchise to start or run your own business, learn all you can before you buy.
With planning and thoughtful execution, a franchise business can be just as rewarding as any other startup.
Check out our complete guide on starting a business to ensure you’re prepared to open a successful franchise.