Considering franchise ownership? Our Franchising 101 guide details the initial steps on how to become a franchise owner, including how to research and apply for a franchise opportunity. Here’s what to know before buying a franchise.
Once you’ve decided that franchising is your path to business ownership, start researching different industries. First, take an inventory of your skills and hobbies to see what field you want to work in. Next, consider how much time you can commit to the business. Are you going to go full-time and be an owner-operator or try to be a semi-absentee or absentee owner?
Then, determine if that industry or business is in demand in your desired market. If it is booming, is there already a supply of companies meeting the need, or is there room for your business to earn market share?
Consider Investment and Ongoing Franchise Costs
Take a financial inventory when researching how to become a franchise owner. Understanding your finances will help trim down what franchises you’re considering. The “financial inventory” should include how much you can spend on the initial franchise fee, your available liquid capital, and your net worth. These are all requirements defined by the franchisor.
Franchise initial investments can be as low as $10,000 or as high as $5 million, according to ADP, a human resources software solutions company. Most franchise initial investments range from $100,000 to $300,000.
These startup costs typically depend on the franchise’s industry, location, and whether it’s a mobile franchise. For example, to become an N-Hance owner, our initial investment is between $57,823 to $168,545. The costs are significantly lower than other franchises because you don’t need a brick and mortar retail storefront, and you don’t have to keep an inventory.
Other financial aspects to consider when comparing brands are the required franchise royalty fees and advertising fund contributions. These ongoing fees are usually a set percentage of your monthly revenue. However some franchisors, like N-Hance, use fixed rates. This method allows the franchisee to reap the benefits of growing the business and increasing profits. As an N-Hance owner, you’d pay no royalty fee for your first three months, a lower fixed royalty fee for your next six months, increasing to $786 monthly after that. Advertising fund contributions are set up similarly. N-Hance charges a flat monthly ad fee of $220. When comparing brands, you’ll want to ensure that these two fees are proportionate to your revenue and that the franchisor provides comprehensive systems and support in exchange for the fees you’re paying.
Inquire with a Franchise
You’ve found a franchise you think you’d like to join and now it’s time to connect with them. The next step in how to become a franchise owner is filling out an information request form. Most franchisors will have an online form, like this one, to connect with you and send you a free franchise information report. From there, the franchisor sets up a discovery call with you. First, they’ll discuss startup cost expectations and what market you’re interested in. Next, you’ll begin exploring business goals and objectives and submit your pre-qualification information.
The franchisor should also send you their franchise disclosure document (FDD). The FDD is a 23-section legal document that franchisors are required to have and share with prospective franchisees. It includes information the franchise must disclose according to the Federal Trade Commission, like fees, litigation history, franchisee obligations, assistance and support provided, and territory details. Some even include financial performance representations of current franchisees. These documents are lengthy and convoluted. It’s vital to go through them with a lawyer.
Throughout the entire franchise discovery process, don’t be afraid to ask questions. For example, ask the franchisor to describe their top performers’ characteristics to see if you’re similar to what they depict.
Other franchise questions to ask could be training related: Who attends the training and who hosts it? What’s provided in the training and where is it held? How long does it last and how much it will cost? Keep in mind that you’ll be responsible for travel expenses to attend the training. Getting all of your questions answered upfront will help you plan and budget properly.
Question the franchisor on how they define their territories and what the growth potential looks like should you want to expand in the future. Additionally, have the franchisor give you an in-depth look at what they offer for support, including operating systems, and advertising initiatives.
Lastly, be sure you talk to current franchisees. Ask them if they believe the initial investment and ongoing fees is worth what the franchise system provides, if the training was sufficient, and if they would do it all again given an option.
At this point you’re feeling pretty confident this particular franchise brand is your path to business ownership. Now, you need to figure out how to get franchise financing. Fortunately, there are several options. Some franchisors have their own in-house financing options, while others have partnerships with lenders. You can also apply for a commercial bank loan, consult the Small Business Administration for different types of funding, find an investor to fund you, set up crowdfunding, or ask a friend or family member to loan you money.
N-Hance has a unique funding program. Qualified applicants can put 60% down on the initial franchise fee and 40% down on equipment costs and finance the remaining balance over five years. Then, if you end up paying the rest of the amount in six months, you’ll earn a 12% discount on the initial franchise fee.
Sign Franchise Agreement
You’ve chosen your franchise and secured financing; now it’s time to take the final step toward franchise ownership – sign the franchise agreement. This agreement typically includes a set timeline leading up until you open your location. This document will also dictate how long your agreement with the franchise is for. After signing, you’ll begin the training process, site selection, and building your location. If you choose to invest in a mobile franchise, you’ll likely be up and running not long after training.
Become a Franchise Owner with N-Hance
If you like to work with your hands and want to become your own boss, N-Hance could be a perfect fit for you. We’re an affordable franchise that’s thriving in the booming home remodeling industry. We outpace our competition by offering our service at a fraction of their cost and with minimal disruptions in customers’ lives. That said, our premier cabinet refinishing franchise allows for superior revenue potential.
Looking for a business you can grow? We can help with that, too. Our business requires few employees and equipment – making it a highly scalable opportunity.
We’re ready to answer all your questions about how to become a franchise owner with N-Hance. Get started by requesting franchise information.