If you are thinking about how to open your own franchise, there are a number of considerations that you have to make. A lot of time and energy will have to be invested if you want to arrive at the right decision.

There are a lot of franchise opportunities in the market but you have to consider the suitability of the business to your circumstance and the type of resources that you have. A lot of people who took this route failed because they did not conduct due diligence before making their decision. How does this work?

• How Can I Start a Franchise?
• Can You Make Money Opening a Franchise?
• How Much Money Does a Franchise Owner Make?
• Is Being a Franchise Owner Profitable?
• Factors That Can Influence What a Franchise Owner Gets
• What is The Cheapest Franchise to Open?
• How do I Start a Franchise With no Money?
• How Much Does it Cost to Own Your Own Franchise?
• How do You Start Your Own Franchise?
• Is it Cheaper to Buy a Franchise or Start Your Own Business?
• How do You Franchise Your Own Business?
• How Much Should It Cost to Franchise My Business?
• Why Franchise is Better Than Starting Your Own Business?
• How Much Does it Cost to Start Your Own McDonald’s Franchise?
• What is The Benefit of Buying a Franchise
• Which Franchise Makes The Most Money?
• How Much do McDonald’s Owners Make?
• How Much Does a Starbucks Franchise Cost?

How Can I Start a Franchise?

A franchisee (entrepreneur) purchases a franchise (type of license/permit) allowing them access to the franchisor’s (established company) business resources, such as their name, business models, systems, and trademarks.

Read Also: Importance and Advantages of Having a Business Card

Franchisees pay a franchisor a variety of franchise fees depending on the business and licenses.

These generally include start-up fees, annual fees, and possibly commissions or royalty payments on profits.

Identify your personal resources

Start by identifying the type of skills, training and experience that you have. This will make it easier for you to know the type of business that is suitable for you. Matching your passion, interests and skills to the right franchise is very important. For instance, if you know nothing about cooking and you don’t like hanging around kitchens, it may not be advisable for you to start a restaurant business.

Search for franchise opportunities

Once you have determined your skill set, you have to find out the type of opportunities that are available. The easiest way to do this is to search on the internet. There are now several websites that provide detailed information about different business opportunities. You have to check the prospects of the business as well as the market trends. Compare the offers provided by different companies that are offering similar businesses.

Check the Franchise Disclosure Document

This is the documentation that is provided by the franchisor to potential franchisees. This document should be read carefully. Some of the important details to look out for include litigation problems, franchisors responsibilities, franchisee’s responsibilities and the limitations on the sources of services or products. You should also find out if the franchisor will provide you with any form of financing.

Interview current franchisees

A very good way to get reliable information about a franchise is to speak with people who are already in the business. It will be easier to get information from these people if you speak with those that are in another city. Find out the level of support that is given to them by the franchisor, how long it took them to breakeven, issues with the franchisor and so on.

Financials

Franchises are offered at different prices so you have to determine how much you are ready to invest. Find out how much you have to pay as down payment. You have to also know what is covered by the franchise fee. Some fees may be lower because the cost of training and marketing is not included. The franchiser will also want to see proof of your financial ability.

Seek counsel

The process of opening your own franchise is not very simple. It is always better to hire a franchise lawyer who will help you to review the agreement before you sign it. It is vital to have a clear understanding of the contract. Make sure that you hire an attorney who has a lot of experience in franchise law.

Can You Make Money Opening a Franchise?

Many people think that buying a franchise is a sure way to become a successful business owner, but in reality, there are a number of reasons why becoming a franchisee isn’t all it’s cracked up to be.

According to a survey by Franchise Business Review, the average annual income of franchise owners is about $80,000. But there are many factors that affect franchise income, such as neighborhood demographics and traffic. The same study found that the majority of franchise owners earn less than $50,000 per year, while 7% earn above $250,000.

Buying a franchise lets you skip over some of the early phases of business development, like creating a business plan, branding, and conducting product research. Instead, you can start your business with a market-tested product that is already familiar to your consumers.

How Much Money Does a Franchise Owner Make?

The average franchise owner in the United States makes around $75,000 to $125,000 a year. That’s definitely much more than the average salary of a college undergraduate with less than five years of experience, or around $50,000. However, don’t expect to make around that figure instantly.

Depending on a lot of factors like the profitability of the franchise, your location, and the demand for your product or service, you could make more or less than the average range. According to The Franchise Investigator, around 30 percent of franchise owners make more than $150,000.

These numbers may look great, but don’t let it fool you: not all franchises are a success. Franchise opportunities may try to paint franchises as easy money or the chance to become your own boss, but according to Sean Kelly of UnhappyFranchisee.com, some franchises have up to a 90% failure rate – but these franchises are unlikely to tell you that.

In truth, opening a franchise has the same success rate as opening a small business. And just how successful are small businesses, you may ask? Well, for every hundred small businesses, only 80 will survive their first year, 28 will reach their fifth year, and only eight or nine will survive the first decade of operations.

Like any investment, franchises are a risk. So, despite all the power words and fluff franchises use to attract potential franchisees, it’s always important to do your research before putting money into this venture.

Is Being a Franchise Owner Profitable?

Some researchers have tried to crunch the numbers with the aim of helping potential franchise owners get an idea of the income that they can expect by buying a franchise. According to a survey done by Franchise Business Review involving 28,500 franchise owners, the average pre-tax annual income of franchise owners is about 80,000 dollars.

However, this number should be taken with a grain of salt bearing in mind that it could be inflated by high incomes of a few top performers. When researchers accounted for the inflations caused by the few top franchises, it was established that the average annual income of 51 percent of franchisees is less than 50,000 dollars. The study also found that only 7 percent of franchise owners earn over 250,000 dollars a year.

The survey by Franchise Business Review also found that about 21 percent of franchise opportunities are in the quick-service restaurants’ industry. This is despite the fact that restaurant businesses require a bigger initial investment compared to some other businesses with almost similar profit potential.

On average, franchise owners in the restaurant industry take home about 82,000 dollars a year. However, the start-up cost can be anywhere between 100,000 dollars and a million dollars.

Factors That Can Influence What a Franchise Owner Gets

Clearly, determining how much you are going to make as a prospective franchisee can be quite a daunting task. The truth is that it is very unlikely that any two franchise owners are going to make exactly the same amount of money in a given year. Some of the factors that influence the profitability of a franchise include:

Business Expertise of the Franchise Owner

Of course, one of the main benefits of buying a franchise is that you will benefit from the franchisor’s expertise, leadership, and guidance. However, like in any other business, your own work ethic and business knowledge will significantly influence your success. The more knowledgeable and hardworking you are, the more likely it is for you to succeed as a small business owner.

Stock Control

When you buy a franchise the franchisee will probably advise you on controlling stock to minimize inventory cost, meet client demand, and ensure adequate stock turn. But your profits can also rely on your ability to minimize costs. If you are committed to minimizing operational costs without compromising on the quality of services, then you can achieve higher business profit.

Workforce

Inasmuch as you are going to benefit from the loyalty of the franchisor’s customer base, you also have to do your bit to keep them coming back. To this end, you need to hire qualified people who can provide quality products and manage business operations properly.

What is The Cheapest Franchise to Open?

Although it’s certainly possible to buy a cheaper franchise without breaking the bank, low-cost franchises tend to be less well known too, so your profits from the business might not be very high. Before venturing into one of these opportunities, do your research, review franchise paperwork, and evaluate whether the franchise is expected to have a positive uptrend in revenues and customer demand.

Below are the top 10 cheap franchises to buy if you want to become a business owner.

1. Cruise Planners

Franchise fee: $10,995

Initial investment: $2,095 to $23,367

Interested in owning a travel company? Then consider Cruise Planners, a franchise representative of American Express, which is one of the most widely recognized cruise planning companies in the country. The bonus: You can operate your Cruise Planners franchise out of your home, making the initial investment in this opportunity among the lowest in the market.

2. Fit4Mom

Franchise fee: $5,495 to $10,495

Initial investment: $6,205 to $24,285

Grown out of the popular StrollerStrides fitness programs for mothers of young children, Fit4Mom offers nationwide franchising opportunities with very low startup costs and attractive scheduling options. Becoming a Fit4Mom franchisee allows fitness instructors to conduct their own Stroller Strides Classes, Fit4Baby Classes, Body Back Classes, Stroller Barre Classes, and Fit4Mom Run Club. You can conduct the classes in your own community and on a schedule that’s convenient to you.

3. Chem-Dry

Franchise fee: $23,500

Initial investment: $56,495 to $162,457

Personal financials: $50,000

With an average of 10 billion square feet of carpet installed each year, it’s no wonder that Chem-Dry has become a successful franchise business. Chem-Dry was founded in 1977 with the goal of cleaning carpets and keeping them clean, and since then, they’ve had a consistent track record of supporting their franchisees to build thriving businesses.

Costs to become a Chem-Dry franchise owner can vary widely depending upon your starting equipment purchases—but some franchisees have begun the process for as little as $56,495, including the franchise fee. Fortunately, if you decide you’re interested in opening a Chem-Dry franchise and need help with the initial investment, this franchisor offers internal financing options to help you get started.

4. Jazzercise

Franchise fee: $1,250

Initial investment: $2,500 to $38,000

Of course, we can’t talk about fitness franchise opportunities without including this gem on our list. Founded in 1969, Jazzercise is no longer all about leg warmers and ’80s music. The business that started the dance party craze is making a modern and hip comeback with dance and exercise classes.

Buying a Jazzercise franchise involves submitting an initial investment, finding an ideal location, and polishing up those dance moves. With the low franchise fee and initial investment, Jazzercise is one of the cheapest franchises on our list.

5. Stratus Building Solutions

Franchise fee: $2,700 to $100,000

Initial investment: $3,450 to $100,000

Personal financials: $5,000 to $10,000 minimum net worth and $2,000 to $20,000 cash requirement

Stratus Building Solutions focuses on bringing environmentally friendly solutions to meet the janitorial needs of office buildings, retail shopping centers, restaurants, and more. This franchise started in 2006 and brought on 91 units in 2017 alone.

Stratus Building Solutions offers potential franchisees two options for buying a low cost franchise: unit and regional or executive master. Both options are relatively affordable, but for those that have only a small amount of money set aside to invest in a franchise, the low $5,000 net worth requirement for unit-level ownership makes this option especially appealing.

Interested in starting at a higher level of investment? Stratus offers in-house financing options to help with the initial franchise fee, equipment, inventory, and other startup costs.

6. SuperGlass Windshield Repair

Franchise fee: $5,000 to $17,500

Initial investment: $18,685 to $84,205

Personal financials: $15,000 minimum net worth and $15,000 cash requirement

With just a few weeks of training, almost any aspiring business owner can learn the necessary skills to become a SuperGlass Windshield Repair franchise owner.

Based in Orlando, with locations operating worldwide, SuperGlass Windshield Repair is among the best inexpensive franchises to buy. Focusing on mobile service has allowed this franchisor to keep pace with customer demands, while also keeping startup and overhead costs low for franchisees.

7. Mosquito Squad

Franchise fee: $15,000 to $32,500

Initial investment: $17,050 to $79,425

Most of us think of mosquitoes as annoyance at best, and, in some cases, even a danger to our health. But could saving your neighbors from this backyard pest be your ticket to a profitable business?

Founded in 2009, Mosquito Squad is one the best-known names in pest control nationwide. Since that time, they have over 200 franchise locations and $50 million in sales. Their franchise fee is cheap, plus Mosquito Squad has third-party lender relationships to help facilitate financing, making it easy to get into business ownership.

8. Pillar to Post Home Inspectors

Franchise fee: $21,900

Initial investment: $36,350

With more than 500 franchises in Canada and the United States, Pillar to Post Home Inspectors is an affordable opportunity for a first-time franchisee. This professional home-inspection franchise was started in 1994, and has become the preferred home-inspection company by a number of real estate partners. Join their franchisee team and enjoy the benefits of work-life balance and a proven business model.

9. Property Management Inc.

Franchise fee: $15,000 to $45,000

Initial investment: $21,250 to $106,800

More than 35% of U.S. residents rent their homes rather than own. The growing number of tenants and rental properties means huge opportunity for the property management industry.

Operating more than 200 franchise locations in upward of 40 states, Property Management Inc. offers franchisees the technology, training, and marketing solutions needed to be successful. And you don’t already need to be an expert in property management because Property Management Inc. will provide full-scope training.

Whether you’re an existing property manager looking to grow the scope and support of your business, or you’re brand new to the field but looking for an exciting new career, becoming a Property Management Inc. franchisee gives you a validated model to build your own thriving property management business.

10. Soccer Shots

Franchise fee: $34,500

Initial investment: $41,034 to $53,950

For aspiring business owners who love kids, fitness, and the great outdoors, a Soccer Shots franchise could be the perfect fit. Founded in 2005 by two former professional soccer players, this national franchise enrolled more than 350,000 kids in youth soccer programs last year. And it’s continuing to grow at a 60% rate year over year.

Soccer Shots offers in-house financing to help with the franchise fee. Opportunities to become a Soccer Shots franchisee are limited by geographic territories, but many franchise locations are available in the central and western U.S.

How do I Start a Franchise With no Money?

Franchises have an already-made business plan that has proven to be successful in the past. However, buying a franchise typically requires a lot of money. Keep reading to find out how you can go after those hot franchise opportunities when you have no money.

If you’re excited about a franchise opportunity, but don’t have the capital to move forward, you do have some options.

Franchisor Financing

If you have your mind set on a particular brand, you can do some research if they offer franchisor financing. Many brands understand that their franchisees won’t come to the table with all the capital that’s needed. Ask the band if they provide funding options for their business partners to get started. Note that this option may require you to have very good credit.

The franchisor will also typically require to see some sort of investment from you into the business as well, to show a commitment to the venture.

Traditional Bank Loan

Banks and credit unions do offer small business loans to individuals that meet specific requirements. You may be eligible if you have:

• A good to high personal credit score (from 670-850)
• A good credit utilization ratio (under 30%)
• A long history of credit with banks

Additionally, traditional lenders like giving out loans to franchisees because they’re being backed by a business model that has proven to work in the past. These traditional lenders are especially happy to see brands they recognize, while lesser-known franchise brands may not be as appealing.

Small Business Administration (SBA) Loans

SBA loans are another popular choice for future franchisees. The SBA is a government institution that offers long-term rates at competitive rates. The SBA doesn’t actually provide loans but instead guarantees a loan from a bank or credit union. This is an excellent option for someone with a low credit score who can’t get approved for a small business loan from a bank on their own.

There are two leading types of SBA loans: the SBA 7(a) and the SBA CDA/504 loan. The SBA 7(a) offers individuals up to $5 million with repayment terms ranging from 7-25 years. The loan can be used for a variety of purposes, from real estate to franchise fees. The interest rates for these loans will depend on the amount and length of the loan.

The SBA CDA/504 loan is a collaborative effort, typically broken down as:

• A nonprofit Certified Development Company (CDA) provides up to 40% of the amount needed by the franchisee.
• A bank or credit union provides up to 50% of the amount.
• The franchisee contributes as little as 10%.

With an SBA CDA/504 loan, there are limitations to how the funding can be used. For example, you can’t use the loan to pay for franchise fees.

While an SBA loan is easier to acquire than business loans from traditional lenders, it’s still a time-consuming process and requires the lender to have a decent credit score.

Home Equity Loans

If you own a home, you can take out a home-based line of credit or a home equity loan. Both of these options take the value of the equity from your home to approve the loan or credit. Home equity is the difference between what your property is worth and what you owe on the property.

For example, if a home is valued at $600,000, but you only have $200,000 left to pay, you have $400,000 in equity. Note, though, that most banks won’t let you take out a loan for the entire equity.

A home line of credit allows you to have access to cash, which is backed by the equity of your home.

One downside of the home equity loans is that you’re putting your property at risk if you end up defaulting on your loan. Additionally, home equity loans require a high credit score and good debt-to-income ratio for approval.

Rollovers for Business Startups (ROBS)

Normally, taking money out of your retirement fund comes with lots of fees. However, with ROBS, you can avoid these fees and access your money in just a matter of weeks. ROBS allows you to use your own retirement money to start your business, skipping the process of going to a lender entirely.

To qualify for a ROBS plan, you need to have either a 401(k), 403(b), or an IRA account. You will also need to work with a ROBS provider to access the money, and that provider may charge you a small, one-time fee.

Partnerships

If you don’t have the capital to start the franchise on your own, consider bringing on a partner who can finance the project. An investor can be a friend, family member, or even an old work colleague. However, if you choose this route, be aware that you’re giving up partial control of the business.

You will want to work with a partner that you trust entirely. And, it’s best to draw up a solid partnership agreement that outlines everyone’s responsibilities, rights, and allocation of profits.

How Much Does it Cost to Own Your Own Franchise?

The FDD is an invaluable resource to have as you put together your budget for franchise investment. You can request an FDD, which must conform to Federal Trade Commission (FTC) guidelines, from a franchisor at any time but you must receive one to review at least two weeks before signing any contracts with a franchisor.

Within the FDD, the initial investment for the franchise is covered in detail within Items 5 and 7. Regardless of the franchise, there are some common costs involved with the purchase of a franchise. The first of those costs is the franchise fee.

The franchise fee is basically a cover charge for entry into a franchise system. Think of it as the fee you pay the franchisor for doing the legwork developing the brand, and saving you from many (not all) of the pitfalls that come with starting a business from the ground up.

Other common opening fees for franchises include:

• General office supplies and equipment.
  
• Industry-specific equipment.
  
• Leasehold improvements and construction, if real estate is needed.
  
• Signage and decor, if not a home-based franchise.
  
• Inventory (if needed).
  
• Professional fees (e.g. legal, licensing, accounting, etc.).
  
• Grand opening advertising/marketing.
  
• Insurance.
  
• Taxes.

The chart below is an example illustration of how the initial investment estimate is presented in an FDD for a new franchise unit. The data for the chart was compiled from the 2018 FDD for Budget Blinds.

Name of Fee	Low	High
Initial Franchise Fee	$19,950	$19,950
Initial Territory Fee	$70,000	$70,000
Additional Territory Fee (if second territory purchased at the same time as the initial territory)	$0	$60,000
Excess Costs of Training	$250	$2,500
Work Vehicle	$5,000	$48,000
Computer	$1,000	$3,500
Credit Card Processing Technology	$30	$500
Telephone Equipment	$60	$120
Auto Insurance	$500	$2,400
Commercial General Liability Insurance	$500	$1,500
Contractor’s License and Bond	$0	$1,500
Additional Tools and Supplies	$100	$1,500
Professional Services	$750	$3,500
Additional Funds—first three months	$12,000	$20,000
ESTIMATED TOTAL	$110,140	$234,970

How do You Start Your Own Franchise?

Starting a franchise is a big commitment, and there are a few things to consider. Let’s take a look.

1. Evaluate the costs

Just like any other small business, there are initial costs to getting your franchise off the ground. Here are some common start-up investments:

• Franchise Fee – The franchise fee is the flat cost a potential franchisee pays up front to operate the franchise. Before you pursue a franchise opportunity, make sure you can cover the initial costs, which typically range between $20,000 and $50,000 and can be as much as $100,000, depending on the size of the franchise. Luckily, there are options for financial assistance, such as an SBA loan or bank loan. These can bolster your initial cash investment in the business.
• Equipment and Supplies – Franchisors will provide you with an idea of what equipment will be necessary and how to obtain it. Some even offer financing options for these initial costs.
• Real Estate – The franchisor often provides recommendations for location types and can advise you on what will work best for your business. For example, McDonald’s has specific requirements for their locations (e.g., a building area of 4,500 square feet and on-site parking).

2. Franchisor requirements

A franchisor often has requirements of a franchisee before they can offer a franchise agreement. 7-Eleven, for example, requires new franchisees to have U.S. citizenship or permanent residency, an excellent credit score, and retail experience. Other common details a franchisor might consider include:

• Net worth
• Industry experience
• Cash available
• Other sources of income

These may vary depending on the industry you are joining. And it’s best to contact the franchisor you’d like to work with to get more details and an application.

3. Franchise disclosure document

A franchisor is required to provide you with a franchise disclosure document (FDD) before any contracts are signed. It will include information regarding initial fees, estimated initial investment, and much more.

The franchise disclosure document provides the potential franchisee with all the information they need to make a decision about whether or not to enter a contract with the franchisor.

4. Review the franchise agreement

Once your application is approved, the franchisor will provide you with a franchise agreement. This is the actual contract you’ll sign to become a franchisee and own and operate a business under the franchisor.

It may be helpful to hire a lawyer with franchise experience to help you carefully review and understand the agreement. When you’re ready, sign to begin your journey as a franchisee.

5. Choose a location

Next, you’ll need to find a place to set up shop. Depending on how much money you’re willing to pay up front, buying property and leasing an existing space are both options. And, franchisor’s often provide recommendations for what type of space will work best.

This is the time to work closely with your franchise to ensure the site you pick is the correct size for the store’s needs — and the traffic patterns and foot traffic of the site align with the hours your franchise will operate. Rent costs are another consideration, and it’s best to work with a legal advisor to ensure the lease is the best fit for you and your franchisor.

6. Training

It’s time to learn the ins and outs of the business. Franchisor’s offer training sessions to teach you and your new hires all you need to know about the products or services you’ll sell, their guidelines and policies, and the systems you’ll use. Your franchise will often provide training on marketing, management, and business basics you’ll need to operate the business.

7. Open for business

Once your franchisor sends a representative to approve your location, it’s time to market your grand opening. Franchisors usually have pre-determined ads, signage, and promotion ideas for the opening. And they might even provide you with a corporate consultant to ensure opening day runs smoothly.

Congratulations! You’re well-prepared and ready to open. Get set for your new life as a franchisee.

Is it Cheaper to Buy a Franchise or Start Your Own Business?

You know that you want to run your own business but can’t decide whether you should buy a franchise or launch a startup from scratch. Creating an overview of the pros and cons of each option can help you decide which one is right for your situation and personality.

Franchise: The Pros

At its best, franchising provides an opportunity to buy into an existing, successful business model that comes with a proven track record, a successful training program, a solid supply chain, and expert technical support. Some of the best-known franchises have impressive success rates, with the chances of failure hovering in the low single digits.

By purchasing a franchise, you get a turnkey business that is ready and waiting for you to take the reins. If you are detail-oriented, good at following directions, and comfortable with established systems, franchising provides a quick and easy way to become a business owner.

Depending on the franchise you select, you may have the choice of either purchasing a fully operational location or starting from the ground up at a new location. The former option enables you to step right in and take over a business that has an existing customer base, documented cash flows, and a workforce already in place.

Franchising also provides a clear exit plan. When you are ready to retire, you can sell an existing, well-known business to another would-be franchise owner. Do you like to build a business or do you prefer to get started with a fully-operational business on day one? Either way, franchising would be an option for you.

Franchise: The Cons

Franchising also poses challenges. Purchasing a franchise can be an expensive proposition, with costs often running as high as $500,000 to $1 million. Franchises also come with ongoing expenses that reduce your take-home pay.

There are fees that must be paid to the home office on an ongoing basis, mandates (such as remodeling at a hotel or price reductions for a promotion at a restaurant) that eat into profits, and supplies that often must be purchased at inflated prices. 

While general statistics cite franchise failure rates at an average of anywhere from 15% to 35%, even those statistics can be a bit misleading. Some franchises fail at a rate of just 1% (arguably giving you a 99% chance of success), while others crash and burn at a rate of more than 40%. 

Clearly, not all franchises are created equal, so you need to look carefully before you take the leap. It’s also important to keep in mind that purchasing a franchise is like buying a blueprint for success; like all blueprints, it only works if you follow it. 

Corporate-level scandals, actions, and mishaps can also have negative effects. Consider how the owners of Chick-fil-A franchises had to deal with protests and backlash when the firm’s CEO made comments about same-sex marriage or how Subway franchise owners felt when the FBI charged long-time Subway pitchman Jared Fogle with distributing and receiving child pornography.

If you dislike having your livelihood tied to somebody else’s image, you may want to steer clear of franchises. Ultimately, the franchise owner runs the business but the home office is the boss. If that sounds too constraining for your style, you might be better off starting your own business.

Startup: The Pros

If you’ve got an idea, you may be able to turn it into a business. Sam Walton did it with Walmart, Bill Gates did it with Microsoft, John Schnatter did it with Papa John’s, and countless other entrepreneurs have done the same.

With startup costs that could be as low as $10,000, having your own business – whether full-time or part-time, in your basement, your garage, or even out of the trunk of your car – is significantly less expensive than the costs associated with many franchises.

And if all goes well, your unique idea may become a franchise one day! If you dream big and want a shot at the big leagues more than you want a steady paycheck, launching your own business may be the right move for your personality.

Most important for many budding entrepreneurs, building your own business makes you the boss in every way possible. That is the beauty of being self-employed. You make every decision. You set your schedule. You run the show exactly the way you want to run it. Nobody can tell you what to do because you own the business. If you know how to build a better mousetrap or run a better business, this is your chance to prove it to yourself and to the world.

Startup: The Cons

When you start your own business, you are on your own. Much is unknown – will the product sell? Will customers like it? Will you make enough money to survive? The failure rate is also high. Statistics show that 20% of startup businesses don’t survive the first year; about half make it to year five; and approximately 35% last ten years. If your business is going to survive, you alone will have to make that happen.

To turn your dream into a reality, you can expect to work long, hard hours with no support or expert training. If you try this on your own without any experience, the deck is stacked against you. If this sounds like too big a burden to bear, the franchise route may be a wiser choice.

For a closer look at the challenges you will face, compare a mom and pop hotel to a nationally known chain. Among the tools available to a chain (that you won’t have with your own small operation) is the beautiful facade on the building, the pre-planned maintenance upgrades that keep the lobby and rooms looking good, the housekeeping system that maintains the rooms’ cleanliness, and the state-of-the-art revenue management software at the front desk.

The same comparisons can be done with restaurants, auto-repair facilities, copy shops, and many other businesses. If, on the other hand, looking at the competition leaves you convinced that you can do it on your own, it’s time for you to get started!

How do You Franchise Your Own Business?

When you franchise your business it means that you have taken the necessary legal and business steps to sell franchises, support franchisees, and grow your brand. First and foremost, your franchise lawyer will have to prepare and issue a Franchise Disclosure Document that complies with federal and state law.

When dealing with states that require FDD registration and filings, you’ll also have to register or file your FDD with the state in order to be able to sell franchises.

The following are the steps to franchise your business:

Determine if Franchising is Right for Your Business
Your business, business systems, and, personal goals need to align with franchising. When you franchise you’ll be responsible for recruiting, training, and supporting franchisees as your brand grows.

Franchise Disclosure Document
Your FDD should be prepared to comply with federal and state specific franchise laws and should be specific to your business and the franchise that you are offering.

Operations Manual
You will be providing a confidential operations manual to your franchisees. Your operations manual must document and inform you franchisees about all system requirements and information needed to develop, open, and operate the franchised business.

Register Your Trademarks
You must register your trademarks with the United States Patent and Trademark Office. More about trademarks here and what could happen if your trademarks are not registered.

Establish Your Franchise Company
You will need to establish a new franchise entity, typically a corporation or limited liability company. Your new franchise company will be in the business of selling franchises, supporting franchisees, and building systems to grow.

Register and File Your FDD
Before you can sell franchises in franchise registration states (CA, IL, MD, NY, VA, etc…) or franchise filing states (FL, NC, SC, TX, etc…) you must file the appropriate applications and notices.

Create Your Franchise Sales Strategy and Set a Budget
Even after your legal documents are complete, determining your initial franchise sales strategy and setting a budget is critical. Evaluate your target franchisees, target markets, interest in your franchise and a realistic budget for attracting, training, and supporting franchisees.

The franchise development process typically takes between 90- to 120-days to go from where you are today to being a franchisor legally able to offer and sell franchises. However, once you “franchise your business” you’re just getting started.

How Much Should It Cost to Franchise My Business?

This ultimately depends on who you work with.

When evaluating the cost to franchise your business, it’s important to understand that, generally, there are two stages to the franchise development process:

Stage 1 – The Franchise Development Stage is the franchise development stage where you take the legal and business steps necessary to call yourself a franchisor and start selling franchises. During the franchise development stage, major milestones include developing and issuing your FDD, preparing your operations manual, and competitively benchmarking your franchise offering relative to your competitors.

Stage 2 – The Franchise Sales Stage is the initial franchise sales process over the next 12 months following the issuance of your FDD. During the initial franchise sales stage, you’ll be taking steps to sell franchises through different marketing channels including organic attraction, paid advertising, social media marketing, public relations, and franchise brokers.

What you’ll learn is that the franchise development process is an ever-evolving process that takes place over years as you continuously grow and improve your franchise system.

When we talk about the cost to franchise your business, right now we’re talking about the franchise development process (Stage 1) and this includes: (a) competitively positioning your franchise offerings and the underlying rights and obligations between you and your franchisees, (b) preparing your FDD and the entire legal infrastructure needed to become a franchisor and start selling franchises legally and the right way, and (c) the development of your operations manual.

To get this done and, depending on who you work with and if you prepare your own operations manual, we’ve seen the cost range from $18,500 to $84,500.

Why Franchise is Better Than Starting Your Own Business?

1. With a franchise business, you get to enjoy a support system from the start

Opening zpizza has been a fantastic, worthwhile opportunity for me, as it has allowed me an ideal balance between being independent and receiving guidance. With an abundance of valuable previous experience, the franchisor has provided me with a strong support system, while allowing me to run my own business.

During the preparation of opening zpizza, they shared their vast knowledge and expertise on the products. Additionally, as the business model had already been set up, I felt safe in the knowledge of the available resources.

2. Your risk factor in launching a franchise business is considerably less

Although, admittedly, there are still a number of risks involved, opening a new outlet has, on the whole, been less risky than starting a business from scratch.

3. You get to research the business’ viability before you start it

One vital piece of information that franchisees hope to obtain is the confidence in which the new investment will succeed. As a business owner, your previous experiences will allow you the ability to sufficiently network –as well as use your connections– to open doors that might not have been opened beforehand.

4. Franchise businesses have higher rates of success

It is a proven concept that franchises have a higher rate of success in comparison to a startup business. As a sizeable amount of work has already been achieved by the franchisor, high-brand awareness and recall has successfully been accomplished.

Before jumping in with two feet and making changes to existing products, it is essential for you to preserve the brand.

5. You are building a business based off a well-established model

Opening a new outlet has ensured that the already successful ideas and operational methods and procedures can be followed. Additionally, as brands commonly have franchises all over the world, they benefit from an internationally recognized brand name.

With over 100 branches across two continents –including the US, South Korea, Vietnam, Bahrain and the UAE– zpizza has the benefit of an immediately recognizable brand name, with an established reputation.

6. Business relationships

As the franchisor has previously built strong establishments, you will be able to benefit from these already-in-place relationships. Typically, companies and businesses are always more willing to engage with internationally recognized brands, as franchisees representing an international brand often receive more credibility. This, in turn, makes it easier to initiate a working relationship for the supply chain, as well as helping to gain access to prime locations. 

How Much Does it Cost to Start Your Own McDonald’s Franchise?

The total investment necessary to begin operation of a traditional McDonald’s franchise ranges from $1,008,000 to $2,214,080. This includes an initial franchise fee of $45,000.00 that must be paid to the franchisor. Since the total cost varies from restaurant to restaurant, the minimum amount for a down payment will vary.

McDonald’s requires each applicant to have a minimum of $500,000 of unencumbered liquid assets available to invest in a McDonald’s restaurant prior to entering into the applicant program.

While this is a minimum requirement, McDonald’s may require that an applicant have a significantly higher amount of unencumbered liquid assets available to inject into a multiple restaurant purchase. The applicant will need to meet an equity requirement established by McDonald’s for the purchase.

What is The Benefit of Buying a Franchise

Because it’s your investment of time and money that is at stake, it’s important for you to consider all of the pluses and minuses involved in buying a franchise. Below are five main benefit of buying a franchise to help you along in your due diligence or research process.

Much of the work needed to launch a business idea has already been done. Products and services will have been established and tested. This includes already recognized branding and trademarks. The franchisor will also have a good idea of what locations and demographics work best for their system.

Not as much, if any, experience is needed to start. Training provided by the franchisor will help franchisees gain or bolster the skills required to operate the franchise. Many franchisors also offer additional training at the franchisee’s request.

Support from a larger network of businesses. Not only does the franchisor give you support in the form of training, an operations manual for you to refer to, and additional ongoing advice, you can also get support from other franchisees in the network. Annual conventions or meetings are a common occurrence for franchises.

Ability to tap into the collective buying power of the franchisor. In many cases, the franchisor has developed relationships with providers that allow its franchisees to purchase goods at a lower cost compared to the price independent owners of a similar business may be able to negotiate for themselves.

In cases, financing may be easier to secure. Banks and other lenders are sometimes more apt to loan money to those looking to buy a franchise because of an existing knowledge of the franchisor’s product or service.

Which Franchise Makes The Most Money?

The following 10 franchises are representative of a range of industries, investment amounts, number of locations, and degree of brand recognition. The diversity on this list is indicative that a franchise doesn’t necessarily have to be top-tier in order for you to turn a profit. That said, we would be remiss not to include some of the world’s most popular franchises on this list, as well.

1. McDonald’s

There is something to be said about brand recognition, and you’d be hard-pressed to find a franchise (or virtually any business, for that matter) with greater brand recognition than McDonald’s. Owning a McDonald’s franchise, wherever you’re located, guarantees a loyal customer base—a key for generating a profit.

With that said, buying a McDonald’s franchise requires a hefty initial investment, so this is not a pathway to profitability if you have limited access to franchise funding. Potential franchisees must have access to at least $500,000 in liquid assets for their application to be considered, and you’ll be expected to put down at least 25% in cash as a down payment to secure your McDonald’s franchise location.

• Initial franchise fee: $45,000
• Estimated initial investment: $1 million to $2.2 million

2. Dunkin’

Dunkin’ franchisees also enjoy massive brand recognition—and that’s especially true in the Northeast, where the doughnut shop is beloved as something of a cultural institution. And, like McDonald’s, franchisees can take advantage of the robust franchisee support system that Dunkin’ offers. But also like McDonald’s, buying a Dunkin’ franchise requires a serious upfront investment.

At a minimum, candidates must have at least $250,000 in liquid assets and $500,000 minimum net worth per unit, though those numbers vary depending on your location. Dunkin’ franchise fees vary depending on your state, so entrepreneurs in certain areas will have a lower barrier to entry here.

Dunkin’ also provides discounts off the initial franchise fee for certain investors, such as entrepreneurs who plan to open several locations, those who plan to open restaurants in developing areas, or qualified veterans.

• Initial franchise fee: $40,000 to $90,000
• Estimated initial investment: $95,700 to $1.5 million

3. The UPS Store

The UPS Store has been ranked among the top five on Entrepreneur Magazine’s Franchise 500 List for the past three years, thanks to the company’s world-class training and support system for new franchisees, strong brand recognition, and spotless reputation.

Opening a UPS Store franchise may require significantly less upfront investment than opening a food franchise with equal name recognition, and the franchise offers programs and incentives to help ease that burden.

The UPS Store is partnered with Guidant Financial, a small business lending institution that can offer qualified investors with franchise financing. They can also provide special financing incentives for veterans, and people opening UPS Stores in rural areas or small store-in-stores. Just be aware that to qualify for a UPS Store franchise, you’ll need to have access to at least $60,000 in liquid assets.

• Initial franchise fee: $9,950 to $29,950
• Estimated initial investment: $138,433 to $470,031

4. Dream Vacations

If you’re interested in owning a travel agency, a Dream Vacations franchise should be at the top of your to-research list. This is one of the most profitable franchises firstly for its low-cost investment: Depending on your experience level, the initial franchise fee may be as low as $495.

That rate is unparalleled by any other franchise we’ve seen, especially from a franchise whose reputation matches that of Dream Vacations. The franchise offers financial incentives for other franchisees as well, including veterans, military spouses, first responders, “community heroes” such as medical professionals and teachers, and members of DiversityFran.

This is also a great opportunity for people who prefer or need to work from home—Dream Vacations franchises don’t require brick-and-mortar locations, so you can run your business entirely remotely.

• Initial franchise fee: $495 to $9,800, depending on experience level (more experienced franchisees receive larger discounts)
• Estimated initial investment: $1,795 to $20,300

5. The Maids

The Maids has over 40 years of experience as a franchise, and that robust support system proves itself in the numbers. According to the company, the average Maids franchise makes about $1.1 million in annual revenue, and their most successful franchise raked in $6.5 million last year.

Plus, their initial franchise fee and other startup costs are much lower than most other cleaning franchise opportunities out there. At the high end, the total initial investment is under $200,000. All in, you can expect to spend a relatively modest $200,000 in your first year of owning a Maids franchise.

• Initial franchise fee: $12,500
• Estimated initial investment: $48,950 to $124,950

6. Anytime Fitness

As the name implies, Anytime Fitness’ unique business proposition is that their facilities are open 24 hours a day, seven days a week, 365 days of the year. The sheer availability of their services maximizes each franchise location’s opportunity to bring in revenue, and the company says that they sign on one new member every minute—which proves their huge, and growing, market.

Interestingly, Anytime Fitness doesn’t collect monthly fees based on sales totals; rather, franchisees pay a flat monthly fee of $699, which makes ongoing costs easier to plan for.

• Initial franchise fee: $3,150 to $42,500
• Estimated initial investment: $58,870 to $521,437

7. Pearle Vision

Founded in 1961, Pearle Vision was revolutionary in eye care for bringing the retail and medical experience under one roof—a business model that continues to be successful today. They’re now owned by Luxottica, the world’s largest eyewear company, which gives Pearle Vision franchise owners access to a massive range of both mid-tier and designer glasses and sunglasses.

That all spells a franchise system with a huge opportunity to generate revenue: In 2018, Pearle Vision locations that employed an optometrist made an average $1.325 million in revenue, and $1.04 million was generated through retail.

• Initial franchise fee: $30,000
• Estimated initial investment: $391,795 to $620,538

8. JAN-PRO

JAN-PRO is a world leader in commercial cleaning and janitorial services, with over 25 years of experience and several innovative, proprietary cleaning systems under their belt. Plus, JAN-PRO offers potential franchisees three ownership options, which are appropriate for varying experience levels and require varying levels of investment.

Uniquely, they offer a remote franchise opportunity, which is both relatively low-cost and flexible for people who don’t or can’t work outside their homes.

• Initial franchise fee: $1,000 to $20,000, depending on the type of franchise you buy
• Estimated initial investment: $1,000 to $768,000

9. Supercuts

Supercuts is one of the most recognizable names in salon franchises, which is likely due to their 40+ years in business and over 2,600 locations. In addition to offering haircuts, Supercuts franchisees can take advantage of diverse income streams to maximize their profitability, like selling hair care products and offering other salon services.

Supercuts candidates don’t need prior experience in the salon industry (though prior management experience is preferred). However, you will need $500,000 in total net worth, $150,000 in liquid assets, and good credit for your application to be considered. While Supercuts doesn’t provide financial assistance themselves, they can link you up with franchise financing institution FranFund to help you secure a franchise loan.

• Initial franchise fee: $39,500
• Estimated initial investment: $151,370 to $321,020

10. Ace Hardware

Ace Hardware offers potential investors three types of franchise opportunities: They can either open a new Ace Hardware store, convert their current location into an Ace Hardware, or open an Ace Hardware Grocery, which converts previously unused space within existing grocery stores into an Ace Hardware “store-within-a-store.”

The latter is the least expensive option, most notably because Ace waives the initial franchise fee for these types of franchises. (Ace also waives the initial franchise fee for veterans.)

That said, new Ace locations and conversions also have ample opportunity to make a profit, thanks to the company’s training and marketing support, name recognition, national presence (they have locations in all 50 states), and robust supplier network. They also don’t collect monthly royalty fees, which cuts out a major monthly expense required of just about every other franchise out there.

• Initial franchise fee: $5,000
• Estimated initial investment: $286,000 to $1.07 million

How Much do McDonald’s Owners Make?

Restaurants generally have low profit margins. Fast-food franchise margins are often particularly thin. But how much money you’ll make owning a franchise depends in part on which franchise you own. If you’re a McDonald’s franchise owner, you may be doing pretty well, but Wendy’s franchises are struggling.

Average net profit margins in fast-food franchises vary greatly from one chain to another. McDonald’s leads with a net profit margin in 2012 of 19.8 percent, increasing to 22.8 percent in 2017. DineEquity (Applebee’s and IHOP) followed close behind with a 15-percent net margin.

A few other franchise brands have also done reasonably well including some, such as Starbucks and Dunkin’ Brands, that are usually grouped in the fast-food category, but that have slightly different business models.

Many other fast-food franchises have had mediocre results, such as Burger King, with a net profit margin of 6 percent, more than two percentage points lower than the average of all companies in the Standard & Poor’s 500 index.

Franchisers and many franchisees alike are cagey about declaring their net incomes. But a 2013 report from Franchise Business Review dug down into the numbers and came up with a net profit of $66,000 per franchise. McDonald’s did much better with an average of around $150,000 per restaurant.

But when you consider that a McDonald’s franchise costs more than $1 million and can easily run more than $2 million, even McDonald’s doesn’t generate excellent average returns on investment. The fast-food franchise business is tough, and success doesn’t come easy.

How Much Does a Starbucks Franchise Cost?

Starbucks do not offer franchises so it is impossible to buy a Starbucks franchise in the United States. However, you can apply to buy a Starbucks licensed store and the average cost of one Starbucks store is US $315,000.

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Also, why Starbucks does not offer franchise is because Howard Schultz, the CEO of Starbucks has long resisted the franchising business model to maintain control over the Starbucks brand, quality of beverages and culture. Therefore there’s no hope for getting a Starbucks franchise.

• Average Cost of opening one Starbucks licensed store is $315,000.

The company has about 4,400 licensed outlets world-wide and the company prefers to use licensing instead of selling franchise in order to keep more control over its outlets and the quality of its products.

Only about one in five stores in Europe, the Middle East, and Africa are company-run. In Asia, where Starbucks is currently looking for growth, a little less than half are company-operated.

Final Words

It is apparent that buying a franchise is quite a great idea for people who would like to become small business owners at the minimum risk possible. This is because a franchise enables new business owners to benefit from the brand reputation that a franchisor has taken dozens of years to build.

It also gives the franchisees access to proprietary knowledge and processes of the franchisor. Besides, if you get everything right, a franchise can be a great way for you to make money and live the American dream.