Franchise Business Ownership Guide

Insights Into Owning A Franchise Business

Franchise BusinessFranchise businesses offer emerging entrepreneurs the opportunity to own their own businesses, with added support and benefits that striking out on their own does not. Buying a franchise business is a great starting place for those who want to try their hand at business ownership, with a safety net that starting a business from scratch does not provide.

The franchise business model has been around for a long time and has been refined and streamlined over the years to provide a lucrative business opportunity to entrepreneurs without the stress and anxiety of launching a new business from square one. A franchise business provides revenue, a sense of independent ownership, and the ability to grow over time and expand your customer base.

What Is A Franchise Business?

At its most basic, a franchise business is an operation where the services or products have been tested regionally, nationally, and even around the world – marketing, selling, in-house operations, etc. – have been streamlined to offer potential franchise owners the most “turn key” business opportunity available. However, there is much more that comes with buying a franchise than a turn key business.

Why Buy A Franchise Business?

Owning a franchise business is an ideal venture for those who are new to business ownership or those who have business experience, but do not want to do all of the legwork of putting together a company from scratch. A franchise business is streamlined, and many can be run with a more “hands off” approach than other business opportunities.

A franchise has built-in marketing and training, which takes the anxiety out of running a business. Additionally, a franchise offers continued support for as long as you remain enrolled in the franchise system. When looking at the franchise business model, or when talking with other franchise business owners in your area, it is easy to see why it is such an attractive opportunity for emerging entrepreneurs.

One of the major advantages to owning a franchise is that it comes with branding that is recognized by a large customer case. One only has to look to the franchise archetype with the golden arches to realize that branding goes a long way in making a franchise business a success. The parent corporation of a franchise (called the “franchisor”) provides the branding and promotional materials to franchise business owners. This is rolled into the initial start up cost, and is part of the recurring franchise fees (see below).
Some franchise business owners need to make inroads with vendors and suppliers on their own. However, most franchisors already have well-established relationships with national suppliers, which gives franchise owners the best deals on the supplies and equipment they need to run their operations smoothly. Some franchises rely on proprietary materials which are purchased directly from the franchisor. This keeps the money in-house and costs low. Most franchisors will supply a list of vendors to use for your franchise business, as well as a schedule of how to order, when, and how much. Franchisors are masters of logistics, which is why, even with very popular items, you rarely see a franchise business run out of anything.
When buying a franchise business, it is important to find out if any special equipment is needed. A small franchise business, such as a travel agency, may require nothing more than a laptop and a dedicated phone line. Other operations, such as restaurants, require line stations, freezers, cooking appliances, and more. Many of the larger franchises use proprietary equipment and can offer discounts to new franchisees. Purchasing equipment can require a hefty cash outlay when starting up. It is also important to ask whether or not there are equipment leasing options available for your franchise business. Leasing equipment spreads out the start-up costs and can lessen the impact on your budget. Franchisors will also provide a list of contact to use to service the equipment used at your franchise business. This is very important because, in the case of proprietary equipment, only certain licensed individuals can provide cleaning, maintenance, and upgrade services for your establishment.
Buying a franchise also means buying a training program for everyone from front-line employees to managers. Franchisors deliver everything needed so that owners have conduct manuals, agreements, guidelines, training videos, applications, and anything else to get employees working as soon as possible. Some franchisors provide training for employees in-house, at your establishment. Depending on the type of franchise, some even offer online training. For managers and franchise business owners, franchisors will usually offer training at their corporate headquarters, to give a much more in-depth view of the franchisor’s hierarchy. The reasoning behind this is that many franchise owners “graduate” to the corporate level, based on performance with their own establishments. Benefits, vacation, insurance, and any additional information will be provided by the franchisor.

Types Of Franchises

The franchise model has changed a lot over the years and there are many types of franchise business opportunities. Franchise businesses are no longer just about burgers and fries. In fact, franchises are in almost every industry – from cleaning to hospitality, healthcare, fitness, daycare, pet care, automotive, and everything in between. If there is something you enjoy or have a talent for, there is a franchise out there that caters to your interests. After you decide on a franchise, the next thing to do is figure out a budget.

Scaling

Not all franchises require the same resources or staffing. When researching your franchise business, you need to apply some critical thinking to figure out how big of an operation your can handle. Not all franchise owners can handle the logistics of a high rise hotel, for example. On the other side of the coin, some people go stir crazy when they are chained to a computer with a headset, running a small franchise out of a home office. There are franchise business opportunities available for operations of all sizes. Whether you enjoy being on the front lines or taking a less micro-managerial role by handling the sales and accounting behind the scenes, there are franchises out there to fit your business ownership style.

Budgeting For Your Franchise Business

Most franchisors have two sets of financial requirements. The first is the amount needed for the initial cash outlay. The second amount is for the cash reserves needed in case of unplanned expenses. Remember, a franchisor can easily calculate the cost of training, branding, equipment, and supplies. Franchisors cannot, however, calculate more fluid start-up expenses, such as the cost of real estate and construction. It is always best to create a budget which is much larger than the financial requirements the franchisor presents. After all, startup expenses can rarely be calculated to the penny. It is always better to have more than enough than put your grand opening on hold while you seek extra funding to make up the difference.

Buying A Franchise

Buying a franchise can be done through multiple channels. The most popular one is to apply directly to the parent corporation. The franchisor will then assess your credit history, financials, and if you have ever had experience running your own business. The franchisor will then ask for an initial investment to cover training, marketing materials, equipment, construction (if necessary) and anything else they need to provide. Another option is to purchase an existing franchise from an owner who is looking to change career paths or retire. The franchisor will still need to be brought into the arrangement – because franchisors do not want one of their operations to get sold to someone who will not keep it running successfully. Franchisors will also see to it that the transition from one franchise owner to another goes smoothly so that customer traffic and sales don’t miss a beat.

Contact A Franchise Business Representative

When you first reach out to a franchisor and express interest in buying a franchise business, they will arrange for a meeting with a franchise representative. The franchise representative will give an overview of how the franchise business works, a rough estimate of how much it will cost, and what is expected of franchise business owners. This is a preliminary interview, of sorts, and if you look like a good fit for a franchise business, a more in-depth interview will be arranged at the corporate level, and the wheel will be set into motion for you to buy your own franchise business.

The FDD

A Franchise Disclosure Document, or FDD, is perhaps the most important part of buying a franchise business. The FDD is a requirement by the Federal Trade Commission which makes all operations transparent to the potential franchisee. The FDD outlines the corporate hierarchy, financial expectations, any involvement the franchisor has with other businesses, as well as other factors to make it as clear as possible what the franchisor is offering. Typically, the FDD is made available within 14 days of any financial transactions, to give franchisees ample time to go over the outlay of the franchise business, as well as any fine print attached to the agreement.

Find A Franchise Business Lawyer

When buying a franchise business, it is important to get a lawyer who has experience with the ins and outs of franchise agreements. A franchise business lawyer will go over the FDD and explain each and every point in layman’s terms. With a franchise business lawyer going over the FDD, potential franchisees will not be blindsided with costs and fees later on down the road. After consulting with a franchise business lawyer, all expectations should be clear, and people can decide whether or not this seems like a potentially beneficial business venture.

Franchise Business Fees

There are many franchise costs to consider when investing in a franchise. To own a franchise means paying a monthly or yearly fee to the parent corporation. This pays for branding, marketing materials, proprietary and software licenses, plus it pays for access to the franchisor’s support network. The support network is a key element in any franchise operation because it helps to resolve problems such as an unexpected need for supplies or labor, troubleshooting in case any point of sale systems go down or help to resolve any HR problems. Most franchise owners consider the recurring fee to be negligible compared to the revenue brought in by a successful operation. All franchise business fees and enrollment charges will be laid out in the Franchise Disclosure Document.

Financing A Franchise Business

There are franchises that have a buy-in price of only a few hundred dollars. Other franchises, such as restaurants, hotels, and resorts, can cost hundreds of thousands of dollars – which is something most people do not have on hand. Some franchises offer their own financing options, and others leave it to the owners to seek out their own funding sources. For some franchise owners with strong credit scores, healthy financials, and a history of running successful businesses, taking out a bank loan might be a viable solution. For new franchise owners, however, bank loans may not an option that’s readily available. Commercial financing programs such as mezzanine financing, asset-based lending, equipment financing, and much more can help make buying and furnishing a franchise much easier than paying out of pocket or going into debt by taking out bank loans.

Franchise Business Brokers

Sometimes it is more cost effective to purchase an existing franchise business. Franchise business brokers deal in existing franchises where the current owners are looking to move on from franchise ownership. Sometimes, these franchise business owners are ready for retirement, or they may want to start up a venture of their own. Whatever the reason, franchise business brokers handle the sale of the operation, often times offering financing and payment options to prospective buyers. Going through a franchise business broker is a viable solution if the franchisor has no plans for opening a new establishment in your immediate area, but the existing franchises in your geographic location are up for sale. Before you sign a franchise agreement, reach out to a franchise business broker and see what is available, and compare prices. It never hurts to explore your options.

SBA Loans

For a franchise business, using an SBA loan provides the most universal funding available. SBA loans can be used for everything from start-up capital to equipment, and even commercial real estate. The Small Business Administration supports people who want to buy into a franchise business and even has specific programs to help new franchisees thrive in a competitive industry. Keep in mind that it is also important to shop around when looking for SBA loans for a franchise business. While the loans are fairly standard, some lenders can get them processed a lot faster than others, and with more competitive terms and rates. The trick is to look for an organization that has been recognized for “preferred financial services” among SBA lenders. These businesses can greatly reduce the time it takes to process SBA loan applications for a franchise business, which means franchisees can access funds and get their franchise businesses up and running faster than most others.

Real Estate For A Franchise Business

The Franchise Disclosure Document will go over location requirements for the franchise business. A franchise business may require nothing more than a home office. Some, however, cannot reside in just any type of structure. If you look at most major franchise businesses, you will see that they have a very specific design, which is part of the brand recognition, as well as making it easy to transfer employees, because the interiors are also the same. The franchisor will tell you what build-outs are necessary for your franchise business, or if an entirely new building will have to be built from the ground up. Sometimes, the franchisor will front some sort of financing options for this construction. Other times, the cost of the building will be rolled into the overall price. However, there are times when it is necessary to seek commercial financing to cover the cost of property acquisition and construction for your franchise business.

Buying Multiple Franchises

Buying a franchise business is only the start for some people. Owning a profitable franchise business gives franchisees the opportunity to launch similar operations in new locations, or purchase existing franchises. This works well for everyone involved. The franchisee gets to multiply their revenue, and the franchisor gets to increase their territory and get a larger market share. If you are particularly ambitious, speak with your franchise representative, and find out if there are paths open to those who want to own more than one franchise business, and build a small empire.

Exit Strategies

There comes a time in every franchise owner’s career when they need to retire, or simply move onto other independent business ventures. Luckily, franchisors have built-in exit strategies available to franchise business owners, so that they can sell off their operation for a profit, and enjoy the money they have made. Many franchise owners like to keep the business within a close circle, and selling a franchise to a family member is a very common occurrence – usually because the relative buying the franchise is familiar with the company, how things are run, and they will ensure a smooth transition. Once you are enrolled in a franchise system, the franchisor will help to set up the sale of your franchise, as well as onboarding the new owner when you are ready to move on.

Better Than A Franchise Business

The Commercial Capital Training Group offers a business opportunity, which is very similar to a franchise business, but better. We provide the tools and training for you to launch your own operation, as well as continued support around the clock. Where we differ from a franchise business is that your company name, logo, and branding are yours. More importantly, your successes and revenue are yours. We will help you design the marketing materials for your business, as well as a live website. We will get you noticed by your target audience. We will be there to answer questions and help boost sales. However, you will not have to worry about “franchise territory,” construction costs, franchise fees, or the other expenses that come with enrolling in a franchise business system. We offer both local, national, and even international recognition, along with a nearly unlimited earning potential – something which does not come with a franchise business. The Commercial Capital Training Group gives you the opportunity to achieve true financial independence, rather than working for a corporate franchise hierarchy.

If you are looking at franchises for the streamlined, turnkey qualities, but want something you can call your very own, the Commercial Capital Training Group is the best opportunity around.

Start A Finance Business Opportunity

For those looking for a turn key business that offers low overhead, a support network, training, and unlimited earning potential, the Commercial Capital Training Group (CCTG) may be the perfect opportunity.

CCTG offers emerging entrepreneurs the opportunity to take on a career in commercial finance. CCTG gives people the training in commercial finance they need, along with the tools and support network so they can meet with people in need of extra working capital and put them in touch with lenders to come to an agreement. Once that agreement is made, you will get a percentage of that deal, plus any recurring fees that are built into the contract. Graduates of our training program operate their own businesses, and many see as much as six-figure incomes.

The Commercial Capital Training Group gives graduates what they need to be financially independent, without any of the extra costs for training other employees, branding, advertising, or construction. We will give you the training, a business you can run from your home on your own time, and the ability to generate more revenue from a single deal than most franchise owners see in a year.

If you are looking at franchises for the streamlined, turnkey qualities, but want something you can call your very own, the Commercial Capital Training Group is the best opportunity around.

Further Reading