The Beginners Guide to Starting a Franchise - MBB Management

The Beginners Guide to Starting a Franchise

starting a franchise

If you are a beginner in the world of business ownership, then you have probably considered one of two options: Opening your own business or starting a franchise. What is a franchise? Well, it is an extension of an existing business that you operate as if it’s your own.

Starting your own business involves developing your brand and your customer base from the ground up, all on your own. But with a franchise, you are tapping into another business’ existing brand and customer base. This is not just appealing financially, but practically.

A new franchise opens every eight minutes. Why? Well, look around you. The economy is incredibly hostile to completely new businesses.

But a franchise of an existing business will allow you to practice the fundamentals of business without having to take on the risk of seeking out a customer base and brand. After all, there are a million reasons why the market might not be receptive to a new business venture.

Back in the late 90s, the movie rental chain Blockbuster invested in a digital rental platform. The idea was that rather than going to a store to rent movies, the customer could rent them from home and play them over the internet. Yes, Blockbuster was working on streaming in the 90s.

The technology of the time wasn’t ready for this innovation, however. Internet speeds couldn’t reliably stream high-quality motion pictures, so the plan was scrapped.

This was not even a new business, really. It was just a business that was too advanced for the technology around it. It had all the marketing and research funding it could ask for, yet it was cancelled without even being announced to the public.

You don’t want your business to suffer the same fate. Running a business isn’t about having the most creative, unique, or cleverly innovative idea for a company. It’s about making money. And opening a franchise lets you do that without any of the extra baggage.

But where do you start? How does a beginner get into the business of franchise businesses?

Those questions are why this article exists.

Start with the Franchisor Agreement

Do your research and find what kind of business seems best for you to open a franchise in. Whether it’s a Burger King or an Apple Store, there are businesses for all types of management, business, customer service, and other skills.

Once you know which particular business you want to open a franchise in, then you can search out their “Franchisor Agreement”. This is an agreement that determines the terms of them letting you use their brand to make money.

This is an important document because it’s not just about sharing revenue. It also includes fees for malpractice, the company’s financial history, and many other things you should review.

Even if a business superficially appeals to you, read their franchisor agreement. It will likely not meet all of your expectations, but that’s not what you’re looking for.

Reading a franchisor agreement (or multiple franchisor agreements) is as much about your expectations being met as it is about your expectations being realigned with reality.

Contact the Franchise and Secure Funding

It’s an easy thing to imagine that the franchise will simply sign the agreement and let you use their brand. But if you are still unsure whether you want to open a franchise or not, it’s better to plan for that assumption. So, what comes next?

Well, many businesses will have agents on hand to help you open the franchise. This includes everything from picking a location, to securing funding from banks, to training employees.

The funding for the franchise will not come from the business, however. That initial funding to buy the property will have to come from you, which means it will likely have to be taken as a loan from a bank. Don’t worry though: These loans are easier to get than most.

Anyone who has tried to start a business, only for the bank to refuse their loan, might be surprised to hear that. But unlike a small business loan, getting a loan for a franchise is as much about the business you’re representing as it is the franchise that you’re starting.

This is not to say banks will throw money at you just for opening a franchise. Choose a bad location, have bad credit, or display gross incompetence, and the bank will refuse the loan even if the franchise could potentially yield dividends.

Make use of the Business’ Support

This is perhaps the most important step of all. Everyone who opens a franchise will sign the agreement, get a location, and secure a loan. Most people will spend their money in the exact same way, as the investment required to make a franchise work are well known.

But not everyone appreciates the guidance that a franchisor can give to a franchise. There is training for everyone that could possibly be in the business.

If you’re opening a McDonald’s, it behooves you to learn what your cashiers are being taught, even if you never have to operate a cash register yourself. This will allow you to see the whole picture.

It will allow you to see the business as both a customer and a producer.

Most importantly however, it will allow you to make small innovations of your own. Perhaps your franchisor knows exactly how a cashier should act. But at the same time, it’s possible that they don’t know the culture or customs of your area.

If you find a way to eek out financial value from adjusting the etiquette of your cashiers, do you think the franchisor is going to care if you insulted their pride by disobeying their rules? Heck no!

The franchisor is concerned with the bottom line and the brand. As long as your innovations to the process don’t affect these things, the franchisor could not care less what you do.

Remember, whether you’re a veteran or a greenhorn, starting a franchise is about one thing: Making money.

One response to “The Beginners Guide to Starting a Franchise”

  1. Siulau Darba says:

    Very interesting, thanks for sharing!

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