What do Firehouse Subs, 7-Eleven, and Anytime Fitness all have in common? Besides being popular household names, they’re all franchises and depending on the region, and you can buy them for less than $100,00!
When most people think of franchises, they think about the stereotypical fast-food restaurant. However, there are numerous franchise options available. When done right, this path can be incredibly lucrative.
Let’s get into how to become a franchisee.
Understanding The Franchise Model
A franchise refers to a business that replicates models across several locations to provide various products and services.
Franchisees can exist in various industries including:
- Fast-food and chain restaurants
- Lodging and business-related industries
- Cleaning and home services
- Fitness studios and gyms
There are approximately 800,000 franchises in the United States. The average franchise investment is around $520,000. Most franchisees work hard on their investments.
Over 20% of franchisees report working more than 60 hours per week. However, most franchisees say that they are working between 40-60 hours on a given week.
The FTC implemented the Franchise Rule in 1979. This rule requires that franchisees provide full disclosure of information to potential franchisees to make a realistic decision about investing in a franchise business.
The FTC put time restraints on this rule. Franchisee owners must provide the information during the first personal contact with the new potential owner. This must be at least ten days before signing any contract or accepting any money. Finally, you must receive all contracts at last five days before executing the documents.
Examining the Competition
Every potential franchisee needs to understand how competition works. If you’re in a metropolitan area, you’re going to be competing with several businesses like yours.
This isn’t inherently bad, but it’s something you need to consider. What does the traffic look like in your competitor’s locations? When are they posting Help Wanted signs?
How And Why Franchises Succeed
Franchising exploded in popularity after World War II. The Lanham Act enabled ‘brand sharing.’ This was a revolutionary concept that allowed to monitor the sourcing of their products.
Franchises succeed because they deliver consistent customer experiences. Think about the franchise industries you frequent. No matter where you are in the world, once you walk into that building, you can expect a similar experience.
This consistency is comforting to many people.
How To Become A Franchisee (That Succeeds)
When it comes to running a franchise, you need to be apt at both business and people. This means understanding the logistics of operating a company. It also means being able to lead, organize, and delegate tasks to your employees.
Start As An Employee
Many successful franchisees don’t start as business investors. Instead, they start in the trenches as actual industry employees.
This serves multiple purposes. For one, it helps familiarize you with the ins and outs of the company. Two, it helps you learn each employees’ tasks and responsibilities.
Loyalty to a job matters. Some companies employ strict policies of only hiring current or past industry employees.
Regardless of the company’s policy, you should be comfortable with getting your hands dirty. If you want to know how the business operates, you need to know what each employee does.
Ability To Follow Rules
Although entrepreneurial spirit matters, you’re not in the franchise business to create and brainstorm new ideas. You’re in the industry to implement someone else’s ideas.
As a result, you need to be comfortable with following directions and orders. You also need to be comfortable with delegating these orders to your staff.
Consult With Other Franchisees
Like most industries, you’re going to get the best, insider knowledge from people who are doing the work already.
This means that you should talk to as many other franchisees as you can. What are the benefits and drawbacks of the job? What did they learn after starting?
How long did it take to start generating profit? What kind of support did they receive from the corporate headquarters? Would they recommend this line of work to someone else?
Maintain An Emergency Fund
Business revenues ebb and flow. Only you can determine your financial comfort with regards to risk.
As a general rule of thumb, it’s a good idea to save at least 12 months worth of living expenses. This cushion serves as an emergency fund, and it can also help subsidize your business during slow months if necessary.
Focus On Work-Life Balance
Yes, you should prepare to work long hours if you own a franchise. At the beginning of your venture, you’ll have to put in a lot of work to get it up and running.
That said, you need to also focus on prioritizing your mental wellness. This includes prioritizing time for your friends, family, and hobbies. It also includes getting adequate sleep, nutrition, and exercise.
If you don’t take care of yourself, you run the risk of burning out. And a burnt-out franchisee makes for an unproductive workplace.
Involve Yourself With The Local Community
Franchises can make meaningful, charitable impact in the world. Even a small bit of goodwill can help improve your community- and boost your establishment’s morale.
Consider sponsoring a local sports team or high school. Donate a portion of your proceeds or product to a beloved charity.
Get your staff involved with community events. This involvement spreads good cheer to your neighborhood. It also provides free or very low-cost marketing opportunities for your business.
Stay Active With Networking
What’s the key to a successful business? Mentorship, connection, and networking. Successful companies require a team of people, and it’s up to you to keep up-to-date with the best contacts in your industry.
Don’t only look at other franchises. Connect with other small business owners. Get involved with the city’s local government.
Take the time to volunteer at local events or festivals. Host an event at your establishment.
Remember that networking is an active dialogue. Be willing to maintain open ears and an open mind.
How To Build The Best Team
Your franchise is only as successful as the team that helps you build it. We all know that it takes time, energy, and resources to find the best employees. It’s hard to find the right talent, and it can be even harder to keep it.
You should look at your recruitment strategy as an ongoing process. Like you want to attract new customers, you also want to attract potential employees.
Of course, this doesn’t mean you need to be actively hiring. It only means that you need to keep your options open. Accept resumes and applications on an ongoing basis.
Use The Right Referral Methods
By far, word-of-mouth is one of the most reliable referral methods. It’s also the cheapest. However, you should maintain various referral sources to attract the most potential employees.
Treat Employees With Respect
This should go without saying, but it’s worth noting. You need to value your employees and show your appreciation for them on a consistent basis.
After all, what kind of reputation do you want your establishment to have? Do you want people to know you as a great place to work- or do you want a reputation for being hostile or incompetent?
Respect doesn’t necessarily translate to income. While you should compensate your employees fairly, money isn’t the only factor in respecting employees. Other strategies include:
Acknowledging good work with praise and attributes
- Communicating your needs in a transparent and clear manner
- Listening to employee concerns
- Asking employees what they need in the workplace
- Honoring flexibility
- Allow employees to maximize and grow their strengths
- Providing valuable employee benefits
In general, this comes down to being a decent human. We all know we should treat others the way we want them to treat us. In leadership roles, this mantra can pay in serious dividends.
Risks of Owning a Franchise
Franchising is not for everyone. Unlike running an independent business, you don’t own unique ideas when operating a franchise. Instead, you abide by strict protocol and routine to get the job done.
Don’t rush into buying a franchise. Although the income flow may be enticing, it will take time and development to accumulate wealth. Unfortunately, many people start with eager expectations and end up crashing and burning.
You need to have an idea of how long it will take you to turn a sustainable profit. Likewise, you also need to identify the salary range you are comfortable making.
If you’re a first-time franchisee, you will make mistakes along the way. You need to be comfortable with learning difficult lessons and making even harder decisions. You also need to be comfortable with asking for help when you need help!
Opening Multiple Franchises
If you’re having success with one, why not add more? That’s the philosophy most successful franchisees have. Multiple franchises have many benefits, including:
- the potential for a higher salary
- diversified income streams
- the ability to share resources and potentially staff
That said, the venture takes time and discipline. Although it may pay off in the long run, the beginning can be rough.
Talk To Corporate
Most companies want to expand, but they don’t want to do it on their own. Instead, they rely on franchisees to help with this expansion.
As a result, many of them offer discounts or other financial incentives for opening multiple locations. At the beginning of your brainstorming, take the time to sit down and discuss your options.
Assess Your Budget
This is business, and any time you expand, you should expect to need more capital and more emergency savings.
Will you need to take out a loan? Will you have to give yourself a salary pay cut? Will you need to hire more managers underneath you?
Don’t jump into large financial decisions haphazardly. You don’t want to make an impulsive mistake. Instead, take the time to look over your budget.
Invest in a CPA or financial advisor if you need help. The professionals can help you with:
- identifying your net worth
- reducing tax liability
- recognizing average income and expenses
- creating personal retirement plans
- discussing healthy financial habits
You don’t want to end up losing money on this decision! Before signing any contracts, take the time you need to evaluate your options.
Know Your Consumers
Being successful at multiple franchises requires similar skills as being successful in a single franchise. How are you keeping your customers happy? What keeps them coming back to your establishment?
Location, Location, Location
We all know the phrase. In business, it’s the phrase that pays. The location can make or break your company’s success.
If you’re adding more stores under your belt, you must know how to vet a good location. Some corporate headquarters provide support in this decision. Others will want your input and ideas.
Know To Delegate
If you struggle with delegating tasks at one location, you’re going to have infinite problems if you decide to open more.
You can’t be in two places at once. You need to know how to hire the appropriate staff and delegate them to handle various tasks. Unless you never plan to go on a single vacation (or take any break whatsoever), this delegation is critical.
Owning a franchise is an excellent way to increase your wealth, improve your local community, and run a business! Learning how to become a franchisee requires patience and determination. You will make mistakes along the way, and it’s essential that you learn from them.
No matter your franchise, we’re happy to help get you the capital you need to start or expand. Get started with us today!