How does a Franchise Business Work?

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How to Open a Franchise in 7 Easy Steps
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• What are the processes and requirements for
  starting a franchise business?
• Some entrepreneurs prefer to open a franchise
  rather than their own business because it seems
  easier. The benefits of a franchise include
  operational/marketing support, brand equity, and
  a proven track record. However, even franchisees
  need time for research and the proper due
  diligence. To help, well walk you through the
  process of opening a franchise.
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• Here are the 7 steps to take when opening a
  franchise
• 1. Do Your Initial Research
• The first step when you want to open a franchise
  is to learn more about franchising in general,
  including how it works, what to expect, and how
  to select from all options available to you.
  Websites like FranchiseGator can help you find
  franchise opportunities that match your specific
  needs. For more information, you can also read
  our ultimate guide on the top websites to find
  franchises for sale.
• Once youve identified a few franchises to open,
  do your research and choose to open a franchise
  that fits your needs. The following are important
  factors that you need to consider when choosing a
  franchise
• Personal preference What type of franchise
  business you would like to own (e.g. food
  business, technology-related products, other
  kinds of services)?
• Cost of the franchise What is the total cost of
  the franchise (including the franchise fee,
  property lease, training expenses, equipment,
  insurance, and more)?
• Internal policies and other rules/guidelines
  What are the franchises internal policies and
  regulations? Do they work with your personal
  management style?

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• Online Research
• Once you have chosen the franchise you want to
  open, you have to know every detail about their
  franchising terms and conditions. Initial
  research usually begins online you can visit
  the franchises website and find out more
  information about them. You may also want to view
  other sources aside from their website, such as
  reviews and testimonials from their previous and
  existing franchisees.
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• Franchise Disclosure Statement
• As soon as you let the franchisors know you are
  interested, they will provide a Franchise
  Disclosure Document, also known as a Uniform
  Franchise Offering Circular (UFOC). It outlines
  the franchising rules, fees, your
  responsibilities, and other important information
  including their financial and legal history. Its
  important to read these rules and regulations and
  ensure that you can fulfill your obligations to
  the franchise.
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• 2. Attend Discovery Day
• Once you choose a franchise, the franchisor will
  invite you to Discovery Day, a day-long event
  where you can meet personally. This is your
  chance to know more about the franchises
  corporate culture, values, policies, and the
  people you will be dealing with. Likewise, the
  franchisor will also have the opportunity to get
  to know you better and size you up as a potential
  business partner, so you have to be prepared for
  discovery day.
• This is usually the day when the franchisor
  decides whether they want to work with you or
  not. What exactly a franchisor looks for varies
  from business to business. Besides specific
  qualifications (like a college degree, business
  experience, trade certifications, and enough
  capital to invest), a franchisor will want to
  know that youre committed, enthusiastic about
  their products and services, and willing to
  follow their policies.
• A typical agenda for a discovery day involves
  group presentations, one-on-one meetings, and
  visits to existing franchises. Make sure to make
  the most out of discovery day and get your
  remaining questions answered. After discovery
  day, franchisors will usually expect you to make
  a decision fairly quickly.
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• 3. Review Your Franchise Agreement
• Considering all goes well with discovery day, the
  franchisor will then present you with the
  franchise agreement. This is the formal contract
  that gives you the legal rights to open a
  franchise, conditional on a long list of rules
  and regulations. Its usually wise to consult a
  lawyer with franchise experience to help with
  your franchise agreement.
• Note the promises made by the franchisor during
  your meetings and see if they are outlined in the
  contract. For instance, if the franchisor
  promised to provide legal support in the event of
  a lawsuit, ensure that this is clearly outlined
  in the contract. The same goes for rules on
  suppliers, pricing, transfer of ownership,
  protection of territory, royalty fees, hiring of
  staff, training, and so on.
• Talk to the franchisor and thoroughly discuss the
  contract and your expectations with them. If
  there are any discrepancies between the verbal
  promises and written contract, bring them up with
  the franchisor. They will most likely tell you
  that the verbal promise was made in error and
  those included in the contract are the actual
  terms. Negotiate the terms when necessary.
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• 4. Get the Right Franchise Funding
• Before you sign the contract, you need to make
  sure that you have enough funds to cover the
  franchise cost and other expenses involved.
  Franchisors normally expect your franchise fee
  payment to be sent with the signed contract. You
  may want to consider applying for startup
  business loans to help finance your startup
  franchise.
• Here are few of your financing options to start
  your franchise
• ROBS (Rollover for Business Start-ups')
• A Rollover for Business Startups (ROBS) lets you
  use funds from your retirement account to invest
  into your franchise without paying early
  withdrawal penalties or taxes. ROBS are usually
  faster to obtain than almost any other startup
  loan. Also, it is relatively simple to set up a
  ROBS and because it isnt a loan, you dont have
  to pay back debt or interest. For more
  information, you can read our ROBS ultimate
  guide.
• A Rollover for Business Startups (ROBS) lets you
  use a minimum of 50k in your retirement account
  to buy a new franchise business. Sign up for our
  free informational ROBS webinar and get a
  complimentary 30-minute franchise financing
  consultation.
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• SBA Loan
• An SBA loan is one of the best ways to cover your
  startup franchise costs. Because these loans are
  guaranteed by the government, they have low
  interest rates, typically between 5 to 9.
  Unfortunately, new businesses may find it
  difficult to get approved for funding. However,
  if the SBA has previously approved loans to the
  franchise youre opening, the review process may
  be streamlined.
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• Traditional Bank Loan
• Another option is to get a traditional bank
  business loan. However, it may not always be a
  reliable option since many banks turn down
  startups. To increase your odds, make sure to
  come in with a strong business plan that is
  focused on franchises. Also, be prepared to
  present your business plan clearly.
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• Franchisor Financing
• Some franchisors can directly loan you the money
  you need to open a franchise with them.
  Sometimes, they partner with a financial
  institution or lender to provide loans. The
  benefit of getting a loan from their partner
  lender is that the lender is already familiar
  with the brands business model, and you might
  also get help filling out the application and
  fast financing.
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• Other Funding Options
• Typically, obtaining financing to buy or open a
  franchise will require a credit score of 680 or
  higher (you can check your credit score for free
  here). If for some reason you cannot obtain
  funding from the sources mentioned earlier, there
  are other franchise financing options which you
  might want to consider. These include microloans,
  crowdfunding, and angel investors to name a few.
  Another good options for funding amounts of 20K
  or less, are small business credit cards.
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• 5. Choose a Franchise Location
• With your funding in place, you can now sign your
  franchise agreement and start planning to operate
  your franchise business. At this point, the next
  step is to choose a location. The franchisor will
  usually provide some guidelines and
  recommendation to help you find an ideal location
  based on their business analysis.
• Franchisors may have some strict requirements
  when it comes to a commercial real estate site,
  which includes the minimum square footage and a
  certain number of parking slots required.
  Further, most franchisors have some territory
  requirements.
• For instance, the location of a restaurant or
  storefront may have to be within a certain
  distance of other franchises. Typically, the
  larger the franchise the smaller the protected
  territory. You might also want to choose a
  location based on traffic, which can increase
  your sales. Read our guide on how to determine
  foot traffic and use data to choose the right
  franchise location.
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• Buying vs. Leasing Your Location
• Most franchise owners are torn between buying or
  leasing a property when they open a franchise.
  For a start, franchise owners will lease a
  property because theres lower risk and it
  requires less money upfront. However, if youre
  planning to stay in the same location for 7 years
  or more, consider buying commercial real estate
  instead. For more information and a real-life
  example, read our article on buying vs leasing
  commercial real estate.
• There are commercial real estate loans which can
  help you fund your property purchase. These
  include SBA 7(a), SBA 504, Conventional Bank
  Loans, Online Marketplace Loans, and Hard Money
  Loans to name a few. Average rates range from
  3.5 to 18 depending on the type of loan and
  your qualifications as a borrower. To better
  understand these rates, you can read our article
  on commercial real estate loan rates.

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• For those looking to lease property, its
  important to do the following
• For Retail Spaces
• Pay close attention to the 5 location criteria
  (is the area safe, accessible, near your target
  customers, near competitors, and near compatible
  businesses?)
• Try to estimate the square footage you need as
  accurately as possible
• Negotiate your rent without extending the lease
  for your retail space longer than youre
  comfortable
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• For Office Spaces
• Only pay for the quality you need. B-class and
  C-class buildings are less glamorous but can
  function all the same
• Pay attention to the location of employees,
  clients, and other specific business needs
• Negotiate your rent without extending the lease
  for your office space longer than youre
  comfortable
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• 6. Take the Provided Franchisee Training
• The next important thing that you must do is to
  take the necessary franchise training programs
  provided by the franchisor. Depending on the
  franchisor, this may occur before you sign a
  lease, or while youre in the process of finding
  locations.
• A good training program will not only teach you
  everything you need to know about products or
  services it should also train you in marketing,
  negotiating with suppliers, hiring and managing
  employees, and operations including the filing of
  permits, bookkeeping, creating reports, and more.
  It usually lasts 1 to 2 weeks, with a combination
  of classroom and on-site training with equipment.
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• 7. Prepare for Opening Day
• With everything in place, the final step is to
  open a franchise is get your franchise prepared
  for business. Other remaining tasks may include
  remodeling of interior, leasing or purchasing
  equipment, filling inventory, advertising your
  open jobs, hiring staff, and getting your
  employees trained. Read our guide on how to find
  employees online for more information on how to
  hire the right staff.
• Hiring good employees is one of the most
  challenging parts of starting a business. The
  good news is, there are many different ways to
  find quality employees, both online and offline.
  Also, various online hiring platforms have been
  made available for those who need to hire both
  low-skilled and professional workers.
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• How to Plan a Grand Opening
• Ideally, you should spend up to 20 of your first
  year marketing budget for the opening ceremony.
  This is because the novelty of the grand opening
  makes this advertising budget go much further
  than it does later in the year. Ask your
  franchisor what other successful franchisees have
  done for their opening ceremonies. Additionally,
  you can read more about how to plan your grand
  opening with our ultimate guide on grand opening
  ideas.
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• Bottom Line How to Open a Franchise
• A franchise doesnt totally take the risk out of
  starting a business. While it provides a proven
  model to followfrom products/services, branding,
  and daily operationsit can leave you pretty
  limited. When you choose to open a franchise,
  its important to thoroughly read and understand
  the disclosure document and franchise agreement,
  and seek legal advice from a franchise lawyer.
• Contact Us
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  Royal Palms, Aarey Colony, Goregaon (E), Mumbai
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