Building a business from the ground up is incredibly difficult work. It can take years to get out of the red, and even after pouring in blood, sweat, and tears, there are no guarantees for success. This is why many entrepreneurs instead choose to improve their ROI by franchising with a pre-established brand and business model like McDonalds, UPS, or Chic Fil A.
Have you been considering this move? If so, don’t forget these important steps.
There’s Criteria You Must Meet
Buying into a franchise has proven to be one of the most profitable business venturesan investor can undertake. But not just any random Joe off the street can franchise. You have to apply and then be approved. There are regulations, requirements, and a host of other things a franchisor will need to weigh before approving your franchisee status. Considerations may include:
- U.S. Citizenship
- Net worth
- Credit score
- Applicable experience
- Cash on hand
- Additional revenue streams
Consider the Costs
There are significant upfront costs and investments required to get a franchise off and running. One of the most common mistakes made by franchise buyersincludes rushing head first into a deal without fully weighing the costs.
The franchisor is legally obligated to give you Franchise Disclosure Documents prior to signing any contracts. These documents inform you of all of the potential costs so that you know what you’re signing up for. Common initial expenses include:
- Franchise Fee– In terms of poker, this is the ante. It’s the cost to play. Franchisees must pay an initial fee to the franchise to even have the right to open up a location. This can range anywhere from tens of thousands to hundreds of thousands of dollars, depending on the size and location of the franchise.
- Real Estate– Franchisors often have a list of recommended sites that fit their specific requirements in terms of size, parking, location, etc.
- Supplies– A franchisee will likely need to invest in equipment and supplies to get the business up and running. Speak with your franchisor about what’s needed and how you can go about purchasing or leasing it.
Analyze the Franchise Agreement
Have you been approved as a franchisee? Congratulations! A franchise agreement is likely on the way. When you receive it, you’ll have to review it and then sign it to make everything legitimate.
Set up Shop
It’s official! Now comes the fun part: finding the location. This can be tricky because the spot must meet the franchisor’s parameters.
As you visit and weigh your options, consider the following:
- Buy or let– Will you be purchasing or renting the property?
- Cost of the location– Is it within your budget?
- Traffic– Is it suitable for foot traffic?
- Size– Is it big enough to meet franchise building and parking standards?
Hire a Staff
Your staff is the oil that makes the machine run. What happens when you put the wrong oil in the engine? Catastrophe. Few things will sink your new business venture faster than hiring the wrong staff. Even an established brand can’t fix that issue.
When hiring, you want to bring in motivated, high-character people who will shine a positive light on the brand. To ensure that you’re only hiring the best, consider doing a credit check for employment. Such precautions let you confirm that your staff is who they say they are and also protects your franchise from liability.
Once you settle on a spot, you’re legally obligated to obtain insurance for the business. This may include:
- Property damage
- Worker safety
- Public liability
- Product liability
Speak with your lawyer and your franchisor to know what is typically required.
Train Your Team
Once you’ve staffed up, the team will need to undergo rigorous training. Since franchisors care about uniformity between all of their locations, they’ll provide intense training and information sessions to help your new employees learn the ropes. If you want to give your employees extra training, consider using an eLearning employment training service.
The Grand OpeningNow that all of the preparation has been completed, you’re ready to start your business. Your franchisor will offer plenty of information and advice regarding the grand opening. They may also provide items like ads, signage, and promotions to help kick off things with a bang. After that, it’s your business to run, so best of luck!