Small Business Franchise Episodes – All about franchises.
- FREE DOWNLOAD: Top 4 Benefits of a Franchise Business
These episodes of The How of Business podcast are on the topic of Franchising. Helping you select the best franchise and build a successful franchising business.
A small business franchise may well be the best option for you if you are thinking about starting a new business. Whether you are a first time small business owner, or an experienced entrepreneur searching for the next business opportunity, you should consider a franchise business. A franchise small business can offer the opportunity to leverage a proven business model and the systems and training to help you successfully operate a franchise location of your own. While there are no guarantees for success, you will have the support of a proven franchise operator to help you.
Previous ownership or industry experience is often not required to qualify for a small business franchise location. In fact, many franchisors prefer people without previous experience – they are instead searching for people who are willing to work hard, learn from them and follow the proven process they will share with you.
Franchise concepts are available across just about every industry. It’s much more than just restaurants. From home and business services to virtual businesses, there are thousands of franchise business opportunities to consider and evaluate.
It all starts with determining what is the best fit for you. What type of small business franchise best fits you now and aligns with your long-term plans? An experienced Franchise Consultant is the key to helping you navigate the franchising business opportunity.
Franchise FAQ – frequently asked questions and answers about franchises:
- Q. What is a Franchise Business?
A. A franchise business is a model where an individual (the franchisee) buys the rights to operate a business under the brand name and business model of a larger company (the franchisor). The franchisee receives support, training, and marketing from the franchisor, making it easier to start and run the business. The franchisee often needs little to no knowledge of operating a business, or even industry knowledge, since the franchisor will provide the initial and on-going training and support. Ideally, the franchisor has developed and proven a business model and is licensing this model to an individual franchise location owner.
- Q. How Much Does it Cost to Start a Franchise?
A. The cost varies widely depending on the franchise. Initial franchise fees can range from a few thousand to several hundred thousand dollars. This fee usually covers the license to operate under the franchisor’s name, initial training, and sometimes inventory or equipment. Ongoing fees may include royalties and advertising contributions. In addition to the franchise fees, there other start-up expenses that vary depending on the type of franchise. Many small business franchises range in total investment from under $50,000 to several hundred thousand dollars.
- Q. What are the Advantages of Owning a Franchise?
A. A franchise may offer the advantage of established brand recognition, a proven business model, initial and on-going support from the franchisor, and a network of other franchise owners. This can make it easier to secure financing, attract customers, and operate the business. You also benefit from collective marketing efforts and bulk purchasing power. Learn more about the potential benefits of a franchise by downloaded the free Top 4 Benefits of a Franchise.
- Q. What are the Risks Involved?
A. While franchises can offer a “business-in-a-box” model, they are not risk-free. As with any small business venture, there are always risks involved and there are no guarantees of success. Franchisees are bound by the terms of the franchise agreement, which may include restrictions on how you operate the business. There’s also the risk of the franchisor’s business failing, or other franchise locations performing poorly or failing, which could affect your franchise.
- Q. Can I Choose Any Location for my franchise small business?
A. Usually, the franchisor will have guidelines or restrictions on where you can operate. Some may even assign you a specific territory. It will likely depend on what locations or territories are available for the franchisor. A franchise may only be offering franchises in certain states, for example. It’s crucial to research the location’s potential for that business before committing.
- Q. What Kind of Support Can I Expect?
A. Most franchisors offer a range of support services, including initial training, ongoing training updates, marketing materials, and sometimes even staff recruitment assistance. However, the level of support can vary, so it’s essential to clarify this before committing to a franchise and signing any franchise agreements.
- Q. How long is the Franchise Agreement for?
A. Franchise Agreements are typically for a period of 10 years, with an option to renew. It’s critical that you have your attorney review the Franchise Agreement before you sign it so that you clearly understand the commitments you are making and the responsibilities you are assuming.
- Q. How Do I Choose the Right Franchise?
A. Research is key. Look for a franchise that aligns with your interests and skills. Consider the market demand, competition, initial and ongoing costs, and the level of support provided. It’s also advisable to consult with current and former franchisees to get an insider’s perspective. You should consult with a Franchise Consultant early in your selection process to help you navigate the franchise selection process. When considering the franchisor’s reputation, you should research the franchisor’s history, financial stability, and reputation in the industry. Look for reviews, testimonials, and news articles. A strong reputation generally indicates a more reliable investment.
- Q. Do I Need Business Experience?
A. While having business experience can be beneficial, many franchises are designed to be turnkey operations that can be run by individuals with no prior business experience. The franchisor should provide comprehensive training and support to help you succeed, regardless of your business experience.
- Q. What Are the Ongoing Costs?
A. Apart from the initial investment, franchisees are typically required to pay ongoing fees, which may include royalties based on a percentage of your revenue and contributions to a marketing fund. These fees are outlined in the franchise agreement. These fees are in additional to your other operating expenses for your franchise small business.
- Q. Can I Sell My Franchise Business?
A. Most franchise agreements include terms under which you can sell your franchise business. However, the franchisor usually has the right to approve the new franchisee and there may be a transfer fee. Make sure to understand the resale terms before you invest in a franchise small business.
- Q. How Do I Know if a Franchise Model Suits My Personality?
A. A franchise model often requires you to adhere to established guidelines and protocols. If you’re someone who enjoys complete creative freedom and autonomy, a franchise may not be the best fit. However, if you prefer a structured environment with proven systems, a franchise could be ideal. An experienced Franchise Consultant can help you determine if a franchise business model may be a good fit for you.
- Q. What Time Commitment is Required?
A. The time commitment varies depending on the type of franchise. Some franchise businesses may require full-time involvement, while others can be managed part-time or even semi-absentee. There are franchises can be operated as a side-hustle, allowing you to keep your current job. Assess your availability and lifestyle to determine if you can meet the franchise’s demands.
- Q. How Quickly Can I Expect a Return on Investment (ROI)?
A. Your potential ROI timelines can vary widely among franchises. Some may offer a quicker return due to lower operational costs or a well-established market presence, while others may take longer. It’s crucial to consult with existing franchisees and review financial disclosures to gauge potential ROI. It’s also critical to complete your own Financial Projections to estimate the potential financial returns of your proposed franchise business.
- Q. Can I Balance Owning a Franchise with Other Responsibilities?
A. Owning a franchise can be demanding, especially in the initial stages of the business. Consider your other responsibilities, such as family commitments or another job, to determine if you can realistically manage the workload. Starting any business requires a level of sacrifice. If you prefer or need to keep your current job while you start a small business, you should consider franchises that allow for absentee or semi-absentee ownership.
- Q. What Happens if I’m Not Happy with the Franchise?
A. Exiting a franchise can be complicated and costly. Most franchise agreements have a set term, and early termination could result in penalties. It’s essential to be confident in your choice before making a commitment, and to have your attorney review and provide guidance on the Franchise Agreement before you sign it. It may be possible to sell your franchise location, and the franchisor may also be able to help you do so, but you must abide by any restriction detailed in the Franchise Agreement.
- Q. Should I Consult a Franchise Consultant?
A. Yes, an experienced full-time franchise consultant can offer valuable insights into the franchising world, helping you identify opportunities that align with your goals and budget. They can also assist with the due diligence process. However, it’s essential to choose a reputable and experienced consultant. The Franchise Consultant should be paid by the franchisor, like a Real Estate Broker, so there is no additional cost to you to leverage this help and service to assist you with finding the right franchise small business.
- Q. What Other Professionals Should I Consult?
A. In addition to a franchise consultant, it’s advisable to consult with legal and financial advisors who specialize in franchising. They can help you review the franchise agreement, understand your financial commitments, and assess the viability of your chosen franchise small business.
- Q. What Industries Offer Franchise Opportunities?
A. Franchising is not limited to fast food and retail; it spans a wide range of industries including healthcare, education, cleaning services, pet care, and technology, among others. The industry you choose should align with your interests, skills, and market demand in your location.
- Q. What Funding Sources are Available for Franchisees?
A. There are multiple avenues for securing funding as a franchisee. Traditional bank loans are a common option, but you may also consider Small Business Administration (SBA) loans, which often have lower interest rates and longer terms. Some franchisors offer in-house financing or have partnerships with financial institutions. Angel investors, venture capital, and crowdfunding are other potential sources. It’s crucial to explore all options and consult financial advisors to determine the most suitable funding source for your situation.
Starting a franchise small business can be a rewarding experience, but it’s crucial to do your due diligence and understand both the benefits and risks involved with any small business venture. Always consult with legal and financial advisors before making any significant investment.