Franchising is a smart way to start a business, but a number of important decisions must be made before investing a large amount into buying one. In this guide to buying a franchise, we’ll understand what a franchise is, how a franchise runs its business, and the steps needed to buy a franchise.
What Is a Franchise?
A franchise is a license that permits a product or service to be sold under the franchisor’s brand name while also providing access to the franchisor’s unique business knowledge, methods, and trademarks. To open a franchise, the franchisee usually pays the franchisor an upfront start-up fee as well as annual licensing costs.
They offer their business model, intellectual property, patented name, reputation, and credit to another party called a franchisee, who uses the resources in turn to start a business according to the existing system.
Franchise vs. Starting from Scratch
Starting one’s own business is very different from owning a franchise. When you start your own business, you build everything from scratch. You decide the name, logo, and brand style. You manage the creativity, execution, and everything that goes with it.
Starting your own business is also a long process. You have to figure out everything from product offering to market to price. There’s also a big possibility that your business idea might not work. If you have never been in business before, starting from scratch can be overwhelming.
However, with a franchise, there is no need to start a business from scratch. Franchising allows you to use their name, branding, marketing support, and reputation to get a headstart.
This makes starting a business much easier. If you’re a first-time entrepreneur, getting a franchise from a reputable franchisor can be one of your best investments.
While franchising is often a smoother path, there are still requirements that must be considered.
A franchisee will typically pay a commission or a one-time fee, called a lump-sum contribution, to the franchisor. The franchisee also would pay for any construction and equipment needed to open the business. During the partnership, the franchisee shares a certain percentage of revenue (gross income) with the franchisor. This fee is called a royalty or licensing fee.
A Step-by-Step Guide to Buying a Franchise
Now that we know what a franchise is, let’s look at how to secure a franchise business.
1. Be Confident in Your Decision
Owning a franchise requires a lot of attention, be it mental, physical, or financial; so be confident in your reasoning and analysis before owning one. You have to be sure that you’re up to the task!
2. Critically Research Which Franchise You Want to Own
The popularity of any brand name or franchise doesn’t make it the right choice for you. Spend a good amount of time researching before owning it. Here are some things that you should consider before deciding which franchise to buy:
- Sales: Choose a franchise that has a solid track record of sales.
- A Growing Market: Getting started in a profitable market that might not exist two years from now is not a smart investment. Consider a franchise that is working in a growing market.
- Competition: In every business, there will be competitors, but too much competition in close proximity might cause your business to fail.
- Franchise Fees: Consider your financial investment and what you will receive for it. You should expect great training, marketing, and support.
- Background Check: Speak with an existing franchise owner who can help you determine whether this is a business that you are passionate about, and if it is something you can and want to pursue.
3. Application Process
Just like the franchisee screens the franchisor and the franchise before investing, the application process is where the franchisor investigates the franchisee.
Review and return your franchise paperwork carefully and analytically. These contracts tend to be long and include complex language, so it may be beneficial to consult an attorney to help with this process.
4. Training and Support
Getting the training required can entrench a franchisee into the business. It will help with:
- Branding and marketing
- Products and services, including how to sell them
- Payment technology, i.e., credit card processing
- Sales tactics for this specific business model
Pursuing STEM Franchise Opportunities
The iCode franchise is among the best education franchise opportunities. They’re committed to helping you build a successful business in one of the fastest-growing industries in the world.
Those interested in technology, who have an interest in educating children, and who have a good grasp on how business works will be well suited for this franchise opportunity.
Are you ready to pursue successful franchise opportunities and inspire the next generation of young minds? Learn more about opening your iCode School today!