Thoroughly understand the franchisors’ recruitment process
To have a chance of being selected by a franchisor, you will need to have a well-prepared application that proves that you are the best candidate. Take your time to study the recruiting process. The best franchises have very rigorous recruiting processes to ensure that they choose the right person.
They have several steps in the recruiting process to protect their business integrity and maintain the high standards of the franchisees they choose. On the other hand, if you come across a franchisor that gives you little information about their business, has a very mundane recruiting process, and pushes you to buy a franchise, that’s a red flag. Be careful because it could be a franchisor committing a phishing scam.
Once you’ve decided on a franchise to invest in and obtained all the necessary information, it is time to look for financing for your business. Make sure you have a detailed business plan to pitch to potential lenders. You have several options for obtaining financing. You can consider bank loans, personal loans from banks, small business loans from the government, or other non-traditional lending options. You can also benefit from the support of your family or your friends. Don’t forget that you will also need enough cash when the business is launched to cover some expenses until the business starts making profits.
Read also: How Much Does It Cost To Open a Retail Store?
Participate in a discovery day
A discovery day is an in-depth meeting organized by the franchisor for candidates who meet the company’s requirements from a financial perspective and the essential qualities of the ideal franchisee. The discovery date is an opportunity to ask questions to the franchisor, understand more about their business model and get to know each other. It is also an opportunity for you to exchange ideas with other franchisees.
Only applicants the franchisor deems to be serious will participate in a discovery day. This is the last step a franchisee must take before being awarded a franchise. If you receive an invitation, you must demonstrate you have done your due diligence and are ready to take the next step in owning a franchise. Prior to that meeting, you should:
- Thoroughly review the franchise disclosure document (FDD)
- Understand how the franchise works and its business model
- Know your responsibilities as a franchisee
- Prepare a series of questions to ask the franchisor about things you don’t understand
Sign the agreement and get your permits and insurance
Without a signed contract, there is no proof that you are legally a franchisee. Some franchisors are flexible in negotiating certain terms of the agreement, such as the lease. If you are not, you may want to reach out to a franchise lawyer to find the best options for your business. If the agreement offered by the franchisor is rather rigid, you have nothing to worry about.
On the other hand, if the contract is excessively negotiable, that could be a red flag, a sign that the business isn’t going well, and that you need to do some research on the franchisor. In addition to signing the contract, you must also have the necessary documents to set up your business. Each industry requires a certain number of permits and insurance.
Also, regulations vary by state, county, or city. Even if the franchisor has basic knowledge of the permits, licenses, and insurance you need, it is advisable to check with the appropriate authorities to ensure compliance.
How Much Does Starting A Franchise Cost?
The ideal amount of money you need to open a franchise depends on the sector you have decided to invest in. There are franchises in the home service industry where you can start for as little as $20,000; investments in the hospitality industry can run into the millions. Your franchisor should also be able to give you an estimate of how much it will cost to get started.
You Might Also Want To Read: A Guide For Entrepreneurs Who Want To Open A Franchise
There are leasing programs or loans available to you to reduce your initial cash flow requirements. However, most bankers or franchisors require that you have enough cash to invest in the business. Your franchisor should emphasize the amount of debt that is desirable. So you need to assess your resources to service your debt. Here are some unavoidable expenses you will have to face:
The franchise fee
A franchise fee is a sum of money that the franchisee pays to the franchisor for the right to use the company’s brand and products. The franchise fee can range from $0 to $100,000. Franchisors charge a franchise fee based on brand awareness and competitive pricing. However, the average franchise fee is around $35,000.
Other expenses to cover
These are the expenses that the franchisor won’t cover. Some of these expenses include:
- Insurance, licenses, permits
- Security system fees
- Professional services fees for civil and architectural drawings
- Store decoration and equipment costs
- Real estate and rental fees for finding the right location
- Subcontracting fees
- Security deposits
- POS system and payment processing service
- Management and staff training and salaries
- Legal fees
- Accounting fees
- Office supplies and form
Five Best Franchise To Buy & Own In 2021
There are hundreds of franchises across the United States. In this section, we have compiled the top 5 franchises you should buy in 2021.
Use KORONA POS To Better Management Your Franchise Business
Starting your franchise is one thing, but managing the business is a whole new ballgame. From inventory management to staff payroll to transaction processing within your store, you need the right tool to work your franchise smoothly and faster, not only for your customers but also for your staff. And that’s where our point of sale comes in. KORONA POS is a cloud-based POS system specially adapted for retail franchises and quick-service fast-food franchises. The system is designed to streamline franchise operations from both the franchisor and franchisee perspectives.
- Real-time metrics of all locations
- Scalability through replication and seamless data transfers
- Choose royalty payment structure
- Run cross-store loyalty
- In-depth inventory management
- Establish a franchisee order portal
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