A franchise can be a great opportunity for a business owner with some capital to invest in their own and their employees’ future. It gives entrepreneurs an opportunity to partner with some of the biggest brands in the U.S. and provides built-in resources, training and expertise. In exchange for a franchise fee and royalties, they will provide you with support, training, stock, expertise and marketing to launch your franchise quickly.

In this guide we’ll explore everything you need to do to set up your franchise business and maximize your chances for success. We’ll cover:

How you can understand the world of franchises

Questions you should ask to see if you’re ready to start a franchise business

How to plan out your franchise business and the best legal structure for your new organization

The various rules and regulations you will need to follow

Information on taxes and finances for your franchise business

How to hire employees, marketing and administration

Resources for your franchise business

... and much more

By the time you’ve read through our complete franchise business guide, you will have all the information you need to set up and manage a thriving franchise business. Let’s get into it.

Understanding the World of the Franchise Business

Key Franchise Business Background Data and Statistics

The size and success of franchise businesses might surprise you:

800K

Franchise establishments across the country employing nearly 9 million people.

$900B

Total revenue generated by franchise businesses every year.

Around one in seven franchise businesses are owned by U.S. military veterans.

Franchises exist across many sectors — fast food, restaurants, convenience stores, retailers, financial advice, hotels, car rentals, service providers and many more.

There are over 3,000 franchisors licensing out partnerships to entrepreneurs who can benefit from the support they provide.

40%% Co-owned by a man and a woman
20%% Owned

In other words, franchising is a significant, successful and diverse part of the U.S. economy. Franchise businesses do very well in the U.S.

Advantages and Disadvantages of the Franchise Business

Here are the key things you need to know before deciding of franchising is right for you.

Branding

Branding

You get access to a business with a recognized brand, immediately setting you apart from independent businesses. Franchisors have spent time, effort and millions of dollars on building their brands and creating trust with consumers.

Marketing

Marketing

Local marketing and strong branding will be essential to your success. You will likely need a website and a strong social media presence too.

Support

Support

Franchisors are familiar with helping their franchisees get set up. They will provide resources, training, advice, coaching and support in creating a successful business.

Results are not guaranteed

Results are not guaranteed

Even with a successful franchisor behind you, results are not guaranteed. The success of your business will still be mainly down to your management skills, marketing, customer service and the dozens of other actions an entrepreneur has to take to make this business a success.

You need to pay fees

You need to pay fees

You will need to pay a fee to buy a license to start a franchise, and then continue to pay an ongoing royalty or other fees to the franchisor. Initial fees can run from anywhere from $50,000 up to several million dollars depending on the type of franchise you want to open. You will then be expected to pay a percentage of your revenue to the franchisor periodically to continue operating the business.

There are rules to follow

There are rules to follow

Franchisors often have strict rules you will need to agree to. This could be anything from signage and staff uniforms to how you market and talk about your business. The agreements you have to sign are likely to be long and detailed.

You need to convince the franchisor

You need to convince the franchisor

You do not need to take in and sell stock, meaning you don’t have money tied up in inventory

Understand Your Franchise Market

The market for your franchise business depends very much on the franchisor you set up with. They will be able to provide guidance and expertise on the types of customers you should be marketing to, although you will need to carry out your own market research as well.

Look into the likely demand for services in your area, speak to other franchise businesses in neighboring regions and understand who your competitors are. You should also talk to your franchisor about planned advertising and partnerships.

Is Franchise Entrepreneurship For You?

Franchise entrepreneurship could be for you if you:

Have the capital to pay a franchise fee and open up a location

Can use the marketing and branding of a national organization

Can follow the rules and regulations of the franchisor

Want support and help with starting the business

Don’t mind paying ongoing royalties

What Are the Main Skills, Expertise and Experience Needed to Be a Successful Franchise Entrepreneur?

The specific skills and experience you need depend on the franchising field you go into. For example, if you’re opening a restaurant, it will be all about managing staff and keeping diners happy. If you want to open an automotive service business, you will need to focus on good business processes and hiring expert mechanics.

General business skills that will be useful include people management for hiring and managing staff, financial management for dealing with cash flow and operations to ensure everything runs smoothly. In addition to the standard business skills, you will also need to follow the franchise rules and regulations, so a keen attention to detail will be critical.

Starting Your Digital Nomad Business

Choose the Right Business Structure and Register Your Franchise Business

Now you have all the background information for your franchise business, it’s time to make it into a reality. That starts by choosing the right structure or “legal entity” for your business. In the U.S., there are four main business structures. They are:

Sole Proprietorship

This is the "default" business structure and is what your business will be if you decide not to create a more formal structure. We don't recommend this type of business as it doesn't give you the legal protections you need.

Limited Liability Company or LLC

The most common type of business entity. An LLC is fast, simple and inexpensive to set up and maintain. It protects your personal finances and assets and is a great way to start your franchise business.

Series LLC

This is a special type of LLC entity that's only available in certain states. It allows you to create "mini" LLCs, each with their own limited liability and separate assets, under the umbrella of a master LLC.

S Corporation

This is a more complex type of business and isn't generally recommended for smaller organizations.

C Corporation

These are the largest and most complex types of businesses and are far more than the average entrepreneur or business owner will need.

For more information on the advantages and disadvantages of different types of businesses, please see our in-depth guide

In most cases our recommendation would be to create an LLC. We’ve got a complete guide to everything you need to do, and we can even set one up for your franchise business. LLC formation does vary from state to state, but we’ve got you covered wherever you are.

Most franchisors will insist that you have a proper legal structure around your business entity, and most will expect to see that you have formed an LLC. Their formal agreement will likely be with your business rather than with you personally.

Set up & Maintain Your Franchise Business

Once you've legally created your franchise business, you’ll need to get some other things in place.

The Complete "Start Your Business" Checklist

A Clear and Comprehensive Guide to Starting Your Business the Right Way

The Complete

Franchise Business Resources

The best place to start looking for your franchise business resources is with the franchisor itself. They will have devoted considerable time and effort to providing you with the resources, guidance and support you need to succeed.

See if they have an internet or intranet site where you can meet up with other franchisees to discuss business initiatives, issues and best practice.

Here are some other franchising groups and communities.

International Franchise Professionals Group

Connecting franchise professionals around the globe

The International Franchise Association

Official discussion forums of the IFA

Useful Online Tools for Your Franchise Business

Here are some really great online tools for managing your franchise business. They will reduce the time you spend on administration, help you to collaborate with others and free up your time to grow and manage your new venture.

Conclusion

Starting a franchise business is an amazing opportunity for many entrepreneurs. Provided you have the capital to back you up and you can meet the franchisor’s rules and regulations, you will see huge benefits from their branding, market reach and support. With a vast array of franchises available, you’re sure to find something that meets your vision for the future.