You may have always wanted to own a business, but the thought of getting that business off the ground intimidates you. You might not know where to start when creating a business from scratch! There’s a lot to think about when forming your own business: picking a name, designing a logo, choosing a color scheme, finalizing your product/services, building a website, establishing a social media presence, hiring employees, developing a company culture and structure, crafting a marketing and advertising strategy…and even more!
Plus, if you want to own a business with a physical location, you’ll need to develop the overall look and feel of the space. That’s a lot to decide! If you don’t have prior business experience, it may all feel too overwhelming, and cause you not to start in the first place.
However, all of those little (but important) decisions shouldn’t deter you from owning a business — there are other options to consider. When you don’t want to start from scratch, a great alternative is buying a franchise.
What Is a Franchise?
A franchise is an arrangement where a franchisor entity authorizes a franchisee the right to use its trademark/trade-name (as well as certain business systems and processes) to produce and market a product or service according to certain specifications.
For the opportunity to hop on the success of the parent company, the franchisee usually has to pay a one-time fee plus a percentage of sales revenue as a royalty. But the franchisee also gets plenty of advantages:
- Name recognition the company may already have
- Insight of tried and tested products/services
- Location design/decor standards
- Proven techniques for running the business
- Procedures for training employees
- Ongoing help in promoting products/services
Rather than assume the risks of creating a business yourself, buying a franchise can offer greater financial security and potentially quicker profits. This means that owning a franchise can be an opportunity for consistent revenue and profits.
Plus, you don’t have to waste time and money trying to figure out what works and what doesn’t, since the parent company has already done the heavy lifting for you.
According to the International Franchise Association, this is a business model that works: there are approximately 733,000 franchise establishments that provide 7.6 million jobs in the United States, with an economic output of over $674 billion.
How to Decide on a Franchise
If franchising sounds like it’s for you, the first step is to decide what type of franchise you’d like to own. How about a popular coffee shop or delicious sandwich restaurant? Is it an expensive clothing boutique, or the latest fitness gym craze? Pick something you’re interested in that would also make you happy to own and manage.
Once you understand what type of franchise makes sense, you also need to consider what would be a profitable investment. You wouldn’t want to hop into a franchise when that industry is dying, for example, or sell a product/service that will be outdated in a matter of months. Think strategically about what type of franchise you’re getting involved in, and research the industry, company, case studies, profits, etc.
Search the best franchises in your state to narrow down your options. Maybe the franchise you really want isn’t available in your state or doesn’t make sense for you geographically. You may need to pick a new option, move, or determine a different location for the franchise.
Once you do find that perfect franchise to own, make sure you vet the company. Do all the research you can on the company itself. What do other franchisees have to say? What about their employees? Are they making a profit, and do they have happy shareholders? Consider shadowing another franchise owner to see how they operate, and think about whether this is a model you’d be willing to follow.
Starting a business from scratch isn’t for everyone, but owning a franchise is a great option that opens the door for consistent revenue and profit.
Typically, when you sign a Franchise Agreement, it will state that each franchisee is an independent contractor who is solely responsible for the safe operation of their franchise. So you will probably want to create your own separate legal business entity to operate your new franchise.
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