A Comprehensive Guide to Starting a Franchise Business

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Interested in opening a franchise? You’re not the only one.

Nearly 4% of businesses in the U.S. are franchises, numbering 773,603 total at the end of 2019. The industry employs 18 million Americans and generates more than $2.1 trillion.  

Read on to learn more about starting a franchise business.

Choose Franchise Type

When you wonder how to start a franchise, the very first step is to choose your field. When you think of franchises, you probably think of takeout restaurants like McDonald’s, Taco Bell, or Chick-fil-a, but you don’t need to limit yourself to fast food. Choose something you’ll be passionate about–you have plenty of opportunities to choose from. 

Common franchises include the shipping store UPS, the real estate company RE/MAX, or the exercise program Baby Boot Camp. You can also find franchise opportunities in wedding planning, high school sports photography, house cleaning, travel, and many more.

How Much Does It Cost to Start a Franchise?

Opening a franchise could cost you $10,000, or it could cost you millions. You’ll need to pay for franchise fees, initial investments, and sometimes keep cash on hand as well.

Franchise Fee

To open a franchise, you will have to pay a franchise fee, the cost you pay up front to be able to operate the franchise. Franchise fees vary by arrangement. Some must be paid up front, while other franchise fees may claim a percentage of profits.

These numbers should be easy to find. For instance, if you look up “How much to start a Chick-fil-a franchise,” you’ll find the franchise fee right on their website: $10,000. However, the Chick-fil-a business model works a little differently than most franchise operations.

When you join Chick-fil-a, your franchise fee pays for you to become an operator. You do not own the business–it won’t be an investment for the future, and you won’t get to sell it. But Chick-fil-a does pay most of the startup costs, including buying the real estate, building the restaurant, and buying equipment.

For other franchises, you will need to provide an initial investment.

Initial Investment

You will also need to put up money for an initial investment. For some franchises, such as McDonald’s or Sonic Drive-In, the initial investment can be higher than one million dollars. Opening an RE/MAX, on the other hand, may cost as little as $17,500.

The price of the initial investment depends on a number of factors, including the price of the real estate, so initial investment charges vary wildly.

Liquid Assets

Some companies require you to have extra assets available. For instance, McDonald’s requires each applicant to have at least $500,000 of liquid assets available to invest prior to entering into their program.

Operating Your Franchise

Running a franchise can be a full-time job with overtime. You may have to find the real estate, build a property, hire employees, order equipment and supplies, and take care of all the franchise marketing.

But your franchisor will help you learn how to run your operation.

Starting a Franchise Business

When you’re starting a franchise business, choose something that matches both your passion and your price range. Your franchisor can provide you with everything you need to get started. The rest is up to you!

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