What is franchising?

Franchising allows an individual owner to operate a store or customer base under the umbrella of a large company. Franchises can be fast food establishments, retail stores, service businesses, or anything in between. A franchise offers a business owner the right to use the name recognition and reputation of a much larger entity. A restaurant like “Mike’s Hamburgers” could be good, bad, or average—but when a customer walks through the door of a “McDonald’s”, they know exactly what they are getting.

How to open a franchise:

• Decide what type of franchise you want. Make sure you choose a field you have some familiarity with, or one that offers extensive training.
• Visit the actual retail operation of a franchise as a customer, to get a sense of the day to day operations, and how they work. You may have visited the location before as a customer, but take the time to look around as a potential business owner.
• Contact the franchise provider for information about their specific needs. You may have requirements to meet in terms of location, deposits, costs, and training.
• Review all materials carefully, and make sure all of your questions are answered. The time to get answers to your questions is before you make a commitment.
• Research possible locations for your franchise. Look for areas of high traffic, and make sure you follow any location or real estate guidelines laid down by the franchisor.
• Determine your costs. Make a business plan and outline what your goals and costs will be. You will need to have an accurate picture of your startup costs and operating expenses to determine if the franchise will be cost effective to operate in your chosen location.
• Secure financing. If you do not have enough cash to cover the initial investment and start up costs, you will need to get financing for your business. The good news is that franchises have instant name recognition, and begin to cash flow much more quickly than independent businesses do. Financing is often easier to secure for franchise businesses for this reason.
• Sign all agreements, and open your franchise. Each franchisor is different, and each will have a set procedure for you to follow to open your location. Once the agreements are signed, most franchisors will walk you through until opening day and beyond.

Opening a franchise is a great way to ensure your success, but it can be an expensive venture. Make sure you thoroughly research any opportunity you are considering, and make sure it will suit your needs long term.

Suggested links:

http://www.thefranchisemall.com/ (comprehensive online database of franchisors, with detailed info on costs and returns.)