Guide on How to Become a Franchise Owner


Opening your own business can seem overwhelming, especially if you’re starting from scratch without much reputation. But there’s a solution: owning a franchise. With over a quarter million business owners already on board, franchising offers instant recognition (think McDonald’s) and support from both the parent company and fellow franchisees who’ve been through it all. While you’ll sacrifice some independence, the benefits of joining a proven business model outweigh it. Are you ready to take the plunge? Here are five steps to guide you as you become a franchise owner yourself.

Steps to Become a Franchise Owner

To become the owner of a franchise, you must be proactive and prepared to face various challenges that will come your way. Below is a simple guide to help you get started:

Do thorough research

Thinking about joining a franchise doesn’t mean skipping the homework. Even though there hasn’t been a solid survey in ages about how well franchises do, about one-sixth to one-fifth didn’t make it in the past five years. Just like starting any business, there are risks, but smart planning can cut them down a lot.

Here are key questions to consider:

  • Is the franchise successful? Not all franchises do well. Check the top 50 best and worst ones based on loan default rates. Therefore, you should choose a franchise with a proven track record.
  • Can you afford it? Starting a franchiserequires a lot of money—often tens or hundreds of thousands of dollars. Fast food chains, for instance, may require a minimum net worth of around $1 million. Without enough funds, you can’t open a branch.
  • Is your credit good? You’ll likely need a business loan, so ensure your credit history is solid to secure the necessary funds.
  • Is the location right? Location is crucial to success. Research foot traffic, competition, parking availability, and future developments in the area.
  • Do you have passion? Running a franchise demands hard work and long hours. If you lack passion, especially in food service, reconsider. Make sure your chosen franchise aligns with your interests to ensure dedication and success.

Corporation or LLC

When starting your new gym, protecting your savings is crucial if someone gets hurt, so forming an LLC or corporation can provide better tax benefits. Most franchisors require owners to incorporate, often preferring LLCs due to their flexibility in tax planning and simpler management compared to S- and C-corps. However, there’s no universal choice, and consulting a business lawyer is advisable to tailor your decision to your specific needs.

Apply to the Franchisor

Now that you’ve set up your LLC or corporation, it’s time to apply for a franchise license from the franchisor. Look for a franchising section on the brand’s website to find out their requirements. For instance, McDonald’s has an easy-to-understand FAQ section detailing that you’ll need $500,000 in cash and the franchise fee is $45,000. You can usually apply online too.

Once you apply, the franchisor will likely check your credit and background, and might request more proof of your assets before moving forward, unless your application is immediately denied. You might get invited to a “Discovery day,” where you meet the franchisors and ask questions. It’s like a big interview for both sides to see if you’re a good fit. Ask current franchise owners what to expect so you’re ready.

If everything goes smoothly, you’ll get the franchise agreement. Make sure to review it with your lawyer before moving forward.

Get Your Finances Ready

Before you sign anything, ensure you have the funds to start. Once you’re nearly approved, focus on getting the financing needed for franchise and startup fees. Start by checking with your franchisor; big chains like McDonald’s often have ties with banks for better loan rates. Alternatively, approach banks directly for startup loans or ask the Small Business Administration for advice and loan options.

If you’re open to using your retirement savings and have set up a C-Corp, you can consider the Rollovers as Business Startups (ROBS) option. It’s a risky move, so it’s important to be financially prepared. Once you’ve sorted out your funding, you can proceed to sign the agreement.

The Hardest Part is Just the Beginning

Once you do become a franchise owner, you’ll realize it’s just the beginning. Now comes the real work—launching your franchise! Follow the franchisor’s guidelines to set up your place, recruit and train your team, and kick-start your business plan. With the backing of the franchisor and their recognized brand, you’ll attract customers to your new spot. If you’ve handled everything right so far, your franchise is set up for long-term success.

Become a Business Owner with a Successful Franchise

Now that you’ve learned the ropes of becoming a franchise owner, take the leap and embark on this exciting journey towards entrepreneurship. With thorough research, careful consideration of your financial options, and diligent planning, you can position yourself for success in the franchising world. Remember, while the process may seem daunting, the rewards of owning a franchise with a proven business model are well worth the effort. So, seize the opportunity, follow the steps outlined above, and pave the way for a prosperous future as a franchise owner.


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