How to Buy a Franchise

November 26th, 2009 by Mike

Buying a franchise is an excellent way for an entrepreneur to open their own business. Since a franchise is purchased from an established and successful business, you can expect your business to thrive immediately. There are several steps needed to be taken when deciding to purchase a franchise.

The first step to take when considering to purchase a franchise is to select which franchise you want to buy. Franchises purchased are most commonly fast food restaurants, but many other types of businesses can be opened as franchises including insurance agencies, hotels, and financial services companies. You should carefully consider which franchise to select, as your franchise will consume the majority of your time and money.

The next step is determining how much money you can afford to spend and analyze the costs. Initial franchise fees can range from several thousand dollars all the way up to several hundred thousand dollars. You will also likely have to pay ongoing royalty fees and grand opening fees. If you don’t have enough personal wealth to pay for all of the costs yourself, a bank may be able to give you a small business loan. The small business loan will require you to put forth a personal guarantee, so if the business fails, you will be responsible to repay the loan.

After determining what you can afford, you should begin to research which franchise you’d like to open. Most national franchiser’s websites will have detailed information about franchising information including costs and franchising controls.

After selecting a franchise to pursue, the next step is to begin negotiating with the franchiser. The franchiser normally has many selections they like to control including site selection, design of the franchise store, restrictions on products sold, and restrictions on methods of operations. Most of those selections have levels of requirements which can be negotiated. Having all of the controls set to meet your requirements are important because they will have a large impact on your profitability.

The next step is to pick a location. The franchiser will help with this process, but be sure to open in a shopping center which has anchor tenants that bring in a lot of traffic. Rent may be more at this location, but it will be worthwhile in the end.

The final step is to advertise your new store opening. Ask your landlord for your logo to be put on the pylon sign, and offer grand opening coupons to entice shoppers to visit your location.