The Basics of Franchising

A Franchising F.A.Q.

There's a lot to know about when considering the purchase of a franchise. Many people only "think" they know about franchising, but when you're looking to invest in a franchise business, knowledge is key. Browse the questions below to become a better-educated entrepreneur. If you still have questions, feel free to contact us. We're here to help!

Choose from the following questions:

 

What is a franchise?

A franchise business grants the rights to individual owners, or franchisees, to use the company's name and branding and sell its products and services. The company granting the rights is known as the franchisor. Franchise owners receive training, guidance and support from the franchisor but are required to run their individual location while adhering to specific standards and operating systems in order to maintain consistency and brand integrity.

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How do I become a franchise owner?

If you're interested in starting a franchise there are a few steps you should take to get started. First, you'll need to find the franchise or franchises you are interested in. Maybe you already have a brand or two in mind, or maybe you are interested in a specific industry. Either way, browsing an online franchise directory such as Franchise Gator is a good place to start on your path to becoming a franchisee. You can narrow your search for the right franchise by industry, geographic location and investment level. Once you have identified franchise opportunities that interest you, submit your information using the online form and a representative from the franchisor will contact you to follow up and begin the process. Learn more...

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How do I open a franchise with no money?

It may still be possible to buy a franchise with little or no money. Franchise start-up costs can vary from around $10,000 to more than $1 million. If you're looking to open a business on a budget, a low cost franchise where the start-up costs typically range from less than $10,000 to $100,000 is likely your best option. When it comes to finding financing, a good place to start is with the franchisor. Many offer some type of financial assistance, and some also offer incentives for veterans, minorities and first-time franchisees. Conventional bank loans are another option but will require you to have a good credit rating and/or collateral. Small Business Association (SBA) Loans or loans from an online lending company like Kabbage are typically easier to qualify for. If borrowing from a lender doesn't work for you, look into borrowing from yourself from a retirement savings account, a securities backed line of credit or home equity loan. Learn more...

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How do I buy a franchise?

Buying a franchise is a process that takes careful consideration. First, you need to determine what type of franchise you want to buy. Are you already interested in a specific brand or industry? Researching franchise and business opportunities on a franchise directory site like Franchise Gator is a good place to get started. Next, you'll want to examine the requirements and terms including investment level to determine if it is a good fit for you. Submit your information to the franchisors that interest you, then it's time to begin your due diligence. Research the franchisor's background. Determine if your geographic location is a good area for this type of business and scope out the competition. Carefully review the Franchise Disclosure Document (FDD) and talk to current franchise owners. Make sure you have a good understanding of the requirements as well as the training and support provided by the franchisor before signing the agreement. Enlisting the help of a franchise lawyer and accountant can help ensure you are making a sound decision. Learn more...

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How does franchising work?

In franchising, the parent company known as the franchisor sells the rights to operate individual locations under the company's name and branding and sell its products and services. The relationship is set up through the franchise agreement. These agreements vary from franchisor to franchisor, but typically allow an individual to run a franchised location for a set fee and specific amount of time. In addition to franchise and start-up fees, most franchises also require their unit owners to pay ongoing royalty and sometimes advertising fees. The franchisor provides its franchisees with ongoing guidance, training and support throughout the length of the franchise agreement. Learn more...

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Why should I buy a franchise?

Perhaps the biggest advantage of buying a franchise is decreased risk than going it alone to start a business. Franchising provides entrepreneurs with an established name and branding as well as training and support which improves your chances of success. Of course this does not mean that it doesn't take hard work to build a franchise business, but having these elements in place provides a greater foundation than starting a business from scratch. Learn more...

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What is the best franchise to own?

The best franchise to own depends on your specific interests, skills and experience. It will also depend on what you can afford to invest. Think about your work history and experience. Do you have knowledge in a specific industry? Your interests go a long way in making this decision as well. If you are not passionate about the type of business you choose you are less likely to be successful. It's all up to you. There is a franchise business out there for every preference and skill set. You can also begin your search by viewing our list of the Top 100 franchises to buy. Learn more...

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How do I create a franchise business plan?

Developing a business plan for a franchise is not that different from preparing a business plan for any other type of business except that there is the added advantage of having a lot of the necessary information readily available to you from the franchisor. Many items that you need can be found in the Franchise Disclosure Document including company history, startup costs and ongoing fees, and financial projections. Creating a franchise business plan is an important step in the franchise buying process and if you need to secure financing, lenders will require that you have one. Learn more...

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How do I get money for a franchise?

When it comes to finding financing, a good place to start is with the franchisor. Many offer some type of financial assistance, and some also offer incentives for veterans, minorities and first-time franchisees. Conventional bank loans are another option but will require you to have a good credit rating and/or collateral. Small Business Association (SBA) Loans or loans from an online lending company like Kabbage are typically easier to qualify for. If borrowing from a lender doesn't work for you, look into borrowing from yourself from a retirement savings account, a securities backed line of credit or home equity loan. Learn more...

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How much money can I make owning a franchise?

Predicting your income as a franchise owner can be difficult. Variables such as the type of business, location, the economy, and even your personal dedication to making the franchise a success will all affect how much money your business will make. However, the best place to turn when examining your potential income is the franchisor's Franchising Disclosure Document (FDD), specifically Item 19 which shows individual unit earnings. Learn more...

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How much does it cost to open a franchise?

The cost to start a franchise varies considerably from brand to brand. From low-cost investments starting at $10,000 or less to investing in a hotel franchise which can cost millions, there is a franchise available for almost any size wallet.The startup costs for a franchise are outlined in the franchisor's Franchising Disclosure Document (FDD) in Items 5-7. The initial franchise fee for joining a franchise system can range from $10,000 to more than $40,000, and additional startup costs may include real estate, equipment, inventory, signage, business licenses, insurance and more depending on the type of business you plan to open. Learn more...

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What are the different types of franchises?

The two main types of franchises are business format franchises and product distribution franchises. Franchise businesses are available in more than 150 industries ranging from automotive and healthcare to food and education. There is no shortage of franchise types available for those looking to pursue their dream of owning a business. Learn more...

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What are the pros and cons of franchising?

Franchising can have many benefits but also comes with its own set of risks. The biggest advantage of buying a franchise is the training and support you receive from the franchisor as well as the name recognition. However, when you buy into a franchise system you are agreeing to operate your business as dictated by the franchisor with little autonomy. It's important to fully examine all of the pros and cons to buying a franchise before making your decision. Learn more...

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