How to Become a Franchise Owner

How to Become a Franchise Owner

Celebrated author Stephen King once said, “You can, you should, and if you’re brave enough to start, you will.” This rings true for anyone considering the path of franchise ownership. Clarification of roles is a great place to start your journey. As a franchise owner, you are buying the rights to operate a business that utilizes the successful business model, strategic plans, and brand of an established organization. You, as a franchise owner, can take comfort in knowing that you get to be your own boss and make executive decisions while having the constant backing of a powerful brand.

Benefits of Franchise Ownership

Franchising serves as a low-risk avenue for many aspiring business owners, and it's not hard to see why. Becoming a franchise owner opens up a world of benefits that not all start-ups or self-owned businesses get.

Infographic depicts the benefits of franchise ownership


A Proven Business Model

One of the most appealing aspects of becoming a franchise owner lies in the business model. Rather than starting from scratch, you get to operate under an established entity with an already-tested business framework. This significantly reduces the trial-and-error phase that many new businesses face, allowing you to focus squarely on running your business.

A Recognizable Brand Name

When you start as a franchisee, one benefit is you get to use a brand name that some people might already know. It's like if you open a store that sells a certain kind of food that isn't super famous but still known by some, you have a bit of a head start on growing your brand. You won't have to work quite as hard to explain to everyone what you're selling since there's a good chance they’re already familiar with the brand name. 

Established Operations

The established systems that most franchises offer provide comprehensive guidance on day-to-day operations. You aren't scrutinizing every operational detail alone. There is a tried-and-tested roadmap available for many of the challenges you will face, which can make your transition into ownership smoother and less stressful. Nonetheless, operating a franchise is not just about following a roadmap. It's a unique journey that involves capitalizing on a proven model's efficiency while injecting some of your own personal touch and management style.

Gaining a Deeper Understanding of Franchise Documents

As we journey further into the world of franchising, we come across some vital documents integral to becoming a franchise owner. Among these, the franchise disclosure document (FDD) and the franchise agreement are particularly noteworthy.

Understanding different franchise documents.


The Franchise Disclosure Document (FDD)

The FDD is a legal document that the franchisor must provide to the potential franchisee. This extensive document provides in-depth details regarding the franchise, painting a picture of what you, the franchisee, can expect. It includes sections on the franchise's history, financial performance, and ongoing fees to name a few. Understanding the FDD equips you with comprehensive knowledge about the franchise opportunity at hand, aiding in your decision-making process.

The Franchise Agreement

Closely related to the FDD is the franchise agreement. This legally binding contract is the foundation of your relationship with the franchisor. It outlines the roles and responsibilities of both the franchisee and the franchisor, detailing necessary obligations, terms of service, rights, and restrictions. The agreement also illustrates the conditions under which the franchise can be sold or transferred.

Disclosure Requirements

Now, let's not overlook the disclosure requirements. In the United States, the Federal Trade Commission (FTC) has established rules around franchise disclosures to ensure transparency and protection for franchisees. Franchisors must adhere to these FTC rules and disclose specific information to prospective franchisees. The applicable pre-sale registration and disclosure protect you as the potential franchisee, allowing you to make an informed decision.

All this information might seem daunting but don't worry. The International Franchise Association is here to guide you every step of the way. Don't forget to give these documents the attention they deserve, that way your journey toward becoming a successful franchisee will be smoother and a lot more prepared.

Financial Requirements & Associated Risks of Owning a Franchise

Now that we've discussed the importance of understanding franchise documents let's move on to a topic that often sits top of mind for many prospective franchise owners’ stomachs: the bottom line.

Financial Requirements of Owning a Franchise

Becoming a franchise business owner requires a financial commitment. In addition to the initial franchise fee required to join the franchise, you should also prepare for ongoing royalty and marketing fees. However, these costs can be seen as an investment into a proven business model with a strong brand reputation.

Your net worth and liquid assets are especially important to franchisors. Some franchises state their minimum requirements for net worth and liquid assets in their Franchise Disclosure Document. Prospective franchisee candidates typically need to show a significant amount of liquid capital to ensure they can sustain business operations even if the road becomes rocky.

Financial Resources & Expectations in Franchising

Franchising, as with any business venture, carries a level of risk. However, with careful financial planning and strategic capital management, the financial rewards can make the franchise ownership experience worthwhile. To assist with this, franchises often guide financial expectations.

SBA loans can also provide financial support to prospective franchise owners. As an incentive for economic development, the U.S. Small Business Administration (SBA) guarantees loans to small businesses, including many franchisees. However, it’s important to note that not all franchises qualify for SBA loans.

A franchise broker can be a valuable ally in navigating financial requirements and identifying potential franchise opportunities that align with your financial capability. The role of a broker is to match potential franchise owners with suitable franchise opportunities, factoring in aspects like budget, location, skills, and interests.

Remember, taking the leap into franchise ownership is not a gamble — it's a calculated risk. By understanding the financial requirements and planning strategically, you can set yourself up for success. While the monetary aspect is an essential factor, owning a franchise involves more than just finances. It's about dreaming big and working tirelessly until you achieve it.

Steps to Becoming a Franchise Owner

Having journeyed through the enticing benefits of franchising, the important documents involved, and the critical financial aspects, we arrive at the final destination: the steps involved in realizing your franchise ownership dreams.

Steps to becoming a franchise owner.


Step 1: Conducting Market Research

Conducting market research is the first essential step. Look at the type of franchise that you want to be part of, see what customers in your desired area like, and if there's a market for the product or service you'll be offering. Resources like IFA can provide valuable insights to help with this.

Step 2: The Application

The application process typically starts with expressing your interest in the franchisor. Many franchises have an online form where you can apply or express your interest. After initial contact, franchises would require detailed applications providing more specifics about you, your experiences, and your financials.

Step 3: Dig Deeper Before Making a Decision

Before making your final decision, try to connect with current franchise owners within the network. These current franchisees will provide you with firsthand insights into the day-to-day realities of running the franchise. Events such as a discovery day present an opportunity for you to engage with the franchisor and understand the support and training you'll receive.

Step 4: Sign the Franchise Agreement

Once you've completed these steps, and you still feel that franchising aligns with your business goals, then it might be time to sign that franchise agreement. Your new journey as a franchisee begins!

Remember to focus on the path ahead. There may be challenges. There may be days of doubt. However, the joy of owning your business and making a difference in your community should not be overlooked. Trust that the franchise model allows for structure and established practices which can lead to long-term success.

How the International Franchise Association Can Help

The International Franchise Association is here to accompany you as your guide towards becoming an influential and successful franchise owner. Take the leap of faith into a world of established brands, proven models, and success stories waiting to be written by you.

Achieving your dream of becoming a franchise owner will require a commitment like no other. But remember – every success story starts with a dream and a decision to try. Here’s to your decision to try, to dream big, and to become an influential force in your community! 

Reach out to us today to learn more about how you can start your journey with IFA. Become part of a community that thrives on collaboration, support, and success. Take the first step towards making your dream a reality – join us now to explore the benefits and start shaping your future as a franchise owner.