Buying a franchise provides the unique ability for entrepreneurs to get their feet wet with an already established company and brand. The International Franchise Association defines it as a method of distributing products and/or services involving a franchiser who establishes brand/trademark or trade name, business systems, and a franchisee who pays a royalty in addition to an initial franchising fee for the right to do business under the franchisers name and system.
Before Getting Started
Research and compare all franchise options before starting the process of buying a franchise. There are franchises available for every lifestyle choice and personality type so find one that suits your goals that you’re willing to stick with when times get hard.Â
Look into the company’s background, sustainability proposals, success rates, and if possible, have conversations with other entrepreneurs who own or have previously owned franchises.
9 Steps to Buying a Franchise
Create a Vision
Why are you interested in buying a franchise? How does buying a franchise fit into your portfolio, work-life, schedule? Be clear on your vision so you can be confident in your decision.
Research
Look into the franchise’s track record, the growth market, social responsibility, further business opportunities, and try to find a mentor or owner that can answer any questions you may have.
Start the Application
Franchisers will look into your background and run a credit check. They will look into your finances and ask questions about whether or not you have the time to allot to the business.
Schedule Discovery Day
When buying a franchise, Discovery Day is a way for franchisers to interview you to see if you would be a great fit for the company. Use this time to determine how you feel about the company and ask any questions.
Apply for Financing
Buying a franchise comes with the initial franchise fee, which ranges between $10,000 and $150,000 in addition to startup and build-out costs. Many franchisers offer in-house financing that comes with many benefits (e.g., extra supplies, discounts, incentives, or extra training) as well as the experience of understanding how the process works. They tend to provide very tailored experiences.
Other financing options include commercial loans offered by banks. Banks love franchises: they’ve established businesses, with a proven track record, proven sales, and an already established brand and trademark. SBA loans are also available for entrepreneurs interested in buying a franchise. Crowdfunding, personal loans, and private investors are also options for funding your franchise.
Review and Submit Application
Carefully go over your application, check for errors, make sure everything is accurate, and confidently submit your application.
Obtain Commercial Space
Depending on your franchiser, you may or may not have a say in your franchise’s location. It’s not uncommon for the franchisee to have to secure a commercial location for your new business.
Training and Support
Take all of the support and training that you can get. Owning a franchise is a lot of work. Learn everything you can about the brand, products/services (how to sell, where to buy), displays, technology, processes, marketing, and everything else about your new business. Ask all of the questions and take the time to learn all that you can.
Stay Positive
The first couple of years of owning a franchise is rough. You have to handle hiring, training, and operating a brand new business. Be patient with yourself and remain positive. Ask for help when you need it and take a coffee break whenever you can.
Buying a franchise is a huge commitment, partnering with a financial institution that has the experience and capacity to help you throughout your buying and owning process is very important. Contact Hornet Capital Solutions to discuss your franchising needs.
