Owning your business can be appealing but daunting, especially if you are starting with no name recognition. However, becoming a franchise owner comes with instant name recognition and support from the corporate entity and other franchise owners. The five steps to becoming a franchise owner are discussed below.
Do Your Homework
You will still need to conduct research even if you are buying into an existing chain. You will find that about a fifth of franchise businesses do not survive past five years, meaning there is a risk involved. Some important questions you need to answer are:
What is the success rate of the franchise you want to be part of?
Do you have the finances to start, and if you do not, is your credit score good to get a loan?
Is your location right?
Do you have a passion for that business?
Do not rush into buying; talk to financiers and other franchise owners and see what your options are.
Form an LLC or Incorporate
Most franchisors require the owners to incorporate into a business entity. When you incorporate or form an LLC, you will get better tax advantages. You will also find that since LLCs are not corporations, they have more freedom when it comes to structuring their taxes to suit their financial needs.
Inquire and Apply to the Franchisor
Once you have established your corporation or LLC, you can formally apply for the franchise license from a franchisor. Brands that are open to franchising have a section on their website for you to learn what is required of you before starting. Unless your application is unsuccessful, the franchisor will conduct a background check on your credit and business entity. If your application goes through, you are given a franchise agreement allowing you to open a branch legally.
You need the cash to get started. Once you have received approval, you have to figure out where to obtain financing to cover the startup fees. Big brands have established a relationship with lending institutions and banks, and they can help you get loans at lower rates. You can also explore other alternatives like the Small Business Association for financing.
Once you are done with the hard part, what comes next is building your location, hiring and training workers, and putting your plan into action. With the benefit of a recognized brand name and support from the franchisor, you are good to go.
Is there a franchise that you have developed an interest in but you lack the finances for? Then consider Park Cedar Commercial Lending for financial assistance.