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How to Start a Franchise Business

If you’ve been thinking about starting your own business, this question has probably crossed your mind: “should I open a franchise or start an entirely new brand?” There are some solid reasons for choosing to become a franchise. However, the process might not be simple for newcomers.

Here’s a short guide on how to start a franchise business.

How Franchising Works

Starting a franchise differs in some key respects. For instance, when opting for a certain franchise, you’re also opting for a standardized method of work. It includes everything in the working routine, from the uniform of your employees, to the decoration of your shop, and even to the ingredients you must use.

Franchises must be bought and, according to Forbes Advisor, a franchise purchase fee can cost between $20,000 and $50,000, depending on your choice. There are also franchise royalties, which must be regularly paid to the franchisor. It’s also advisable to have a minimum liquid capital; it means having $50,000 saved for service-based businesses.

What’s the Average Income of a Subway Restaurant Franchise Owner?

Reasons to Take the Shot

Although the initial costs of a franchise might look high, there are a few advantages to choosing to become a franchise. Here are three key aspects that make this option more enticing than others for prospective business owners.

Higher Success Rates

Franchises are less likely to fail when it comes to resisting the testing days of a new business. After all, buying a franchise means buying a tried and tested business model. You can undertake some careful market research before choosing the most profitable franchises in the market.

Brand Awareness by Default

Creating brand awareness takes time—time that some starting businesses don’t have. Worse still, brand awareness can cost a considerable investment in marketing campaigns, online presence, and so on. Pick a famous franchise, and you’ll start your business with a ready fan base.

Better Deals with Contractors

In some cases, you can enjoy existing contracts between your franchisor and certain vendors. It means you can strike better deals by bulk-buying services and goods. However, you won’t be able to choose your vendors, in this case. It can become a disadvantage when market prices are lower than that practiced by your vendor.


Opening a new franchise involves a considerable investment of money and effort. There are a few aspects to bear in mind before choosing your brand. Here are the main ones.

Know Your Business

Take time to do thorough market research about the niche you want to get in. Do you want to open a famous restaurant? Search for the top trending options of the moment and see if there’s one open in your area. You don’t want to start your business amid crowded competition, even if you are joining a widely famous brand.

Have a Plan

Once you’ve decided on a brand to join, it’s time to tailor a plan for your business. This includes a marketing analysis, a management plan, and an outline of financial expectations for the next five years. Additionally, create a digital marketing strategy for attracting more clients.

Calculate the Costs

Franchising isn’t cheap. Make realistic calculations of how much you need to have in your hands just to keep the doors open during the first months. Such costs aren’t only business-related though.

In some cases, your franchisor may request you to travel to their headquarters for training and strengthening brand culture, but generally, travel expenses are up to you. Additionally, consider the local fees charged by your municipality, building permits, and other approvals.

Choose a Business Structure

It could be an LLC (Limited Liability Company) or corporation. Corporations provide a tax structure, while LLCs provide protection for personal assets from liabilities. Generally, the business structure is up to the franchisor, but you’ll need a business entity anyway.


There are many legal and financial issues to take into consideration while investing in franchising. The downside of this option is that you have very limited freedom on how to manage your business, and your staff, and where to shop for goods and services. This option tends to be much safer than creating an entirely new brand.

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