10 Steps when Starting a Franchise Business

What is a franchise? How do you start it? What are he benefits? Well, here is all you need to know about starting a franchise and what its advantages are.

What Does Franchise Mean?

This is how a franchise works: One business, referred to as the franchise, pays another franchisor to use their trademarks and business model. In this partnership, the franchisor offers different kinds of assistance like support services, training, and even advertising.

So, in a way, you work for yourself but not by yourself. This does not have to be a bad thing though, since you are technically the boss of the franchise. You just get additional help and an already-made template for the business.

What types of franchises can I choose from?

Most people instantly think of restaurant industries such as Burger King when they think of a franchise. Even though these types are mostly known, franchises can pretty much fall under any category and any industry. These are just some of the examples:

  • Travel Agents
  • Business service providers
  • Convenience stores
  • Health and fitness establishments
  • Educational franchises
  • Home healthcare providers
  • Pet-care businesses
  • Entertainment franchises
  • Real estate professionals
  • Specialty retailers

Franchises can differ by the industry they are in, but they also have different frameworks they provide. This means you have a lot of different options to choose from, depending on what kind of services you want to provide.

What are the steps to start a franchise?

So, with all that in mind, what are the steps you can take to start a franchise?

Step 1: Consider the pros and cons of buying a franchise

First of all, you need to have a proven track record when starting a business. You need to aim for the business model that has already been proven successful in the marketplace to start a franchise.

Keep in mind that a start-up can be very expensive. Firstly, because you need sufficient starting capital so that you can purchase or lease the space you will use for the business. You also need money to purchase the equipment and to start the inventory, as well as to get the necessary paperwork, business license, and insurance. On top of that, you need the money to hire and train your staff.

You also need to start a business with a built-in support structure. Franchisors are more likely to help the franchisee with a built-in structure and they will help with services such as training, advertising, and providing business advice.

Step 2: Choose a franchise that aligns with your business goals

Then, you need to choose a franchise based on your skills, your goals, and your personality.

Ask yourself:

  • What are my strengths and weaknesses as an entrepreneur?
  • What kind of franchise would I like to own?
  • Do I have business goals and what franchise would help me achieve them?

Step 3: Form an LLC or Corporation

You can either start your franchise as a properly formed corporation or a limited liability company (LLC). This offers a few tax, legal, and business advantages. By incorporating your business, you will create a legal barrier that stands between your business liabilities and your personal assets. Many franchisors opt to work with LLC or a corporation because both of these can qualify for tax breaks and those are unavailable to sole proprietors.

Step 4: Research Market Conditions and Franchise Opportunities

You need to be familiar with market conditions. Do your research so that you know how to succeed in your area. You need to gather the data such as:

  • Private market-research firms
  • Government agencies
  • The business school or Small Business Development Centre at your local university

After doing this research, you will be able to find the franchise that interests you the most. You can simply look up the International Franchise Association’s Franchise Opportunities database to get all the information you need.

After you have done the basic research, expand it by getting in touch with the franchisors. They will provide you with their Franchise Disclosure Document (FDD) that is required by federal law. In this document, you will find pretty much everything you need to know about the franchise. What opportunities it offers, who are the current and the former franchisee, and so on.

In the process of getting the information, make sure you ask the franchisor the following questions:

  • How experienced is the franchisor?
  • How much does starting a franchise cost?
  • What are the ongoing costs?
  • How long does it take for franchisees to become profitable?
  • What kind of support does the franchisor provide?
  • How much control does the support from the franchisor exert over its franchisees?

Step 5: Write a Business Plan

After you have chosen the franchise you will purchase, you need to write a steady business plan. It does not have to be perfect, as you can always work on it, but it needs to be organized.

Step 6: Obtain Financing

Then, you need to make sure you are financially covered. You need to be able to cover your franchise fee as well as start-up costs. If you are looking for financial sources, here are a few good ones:

  • Your franchisor
  • Family and acquaintances
  • Banks or finance companies

Step 7: Review and Sign the Franchise Agreement

The next step is to review and sign the Franchise Agreement, a binding contract between your franchisor and you. For the purposes of reviewing the contract, you should probably hire an experienced attorney to help you go through the contract and analyze it for you. You need to understand the terms, your rights, and your obligations before signing the contract.

Step 8: Pay Attention to Business Compliance Requirements

Before you get to start your business in the area, there are certain licenses and permits you need to acquire. These are just some of the common business licenses, tax registrations, occupational licenses, and health permits. If you fail to acquire these documents, you can get fined by the government. Your franchise could also get terminated by your franchisor if you do not fulfill your licensing requirements.

Step 9: Build or Improve Your Location, Attend Training, and Hire Employees

As a franchisee, you are responsible for building or improving the space of your business. The franchisor provides custom fixtures, blueprints, and signage, but it’s your responsibility to build your space and prepare it. To make sure everything is running smoothly and according to law, you should consider looking into professional property solicitors who will help you find a good spot, make sure the building of the property goes well, and that you stay within the barriers of legal requirements.

As the place is getting ready, you need to gather the team and see what you can do to properly train them and get them ready for work.

Step 10: Open Your New Franchise

The final step is opening your franchise. This is an area where buying a franchise will prove to be more beneficial than starting completely fresh. The franchisor is there to guide you through the opening of the business and they will help you advertise it too.


In conclusion, there are tons of reasons why buying a franchise is a great option. You don’t have to start from scratch, you have an already-built business model you can work with, and you get professional help and guidance from the franchisor. If you are thinking of starting a franchise business, these ten steps will help you and guide you through the process.

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