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A Beginner’s Guide to Franchising a Business in the U.S.

In the U.S. alone, one franchise opens every 8 minutes of every business day. But it comes as no surprise when this industry accounts for approximately 50% of all retail sales in the country. Wherever you go, you’re bound to spot a giant McDonald’s or 7 Eleven sign on the road. Both are common household brands. Both are also franchised.

Given these facts and statistics, many employees who want to quit their day jobs and entrepreneurs who want to diversify their portfolio take an interest in franchising. If you’re among these people, this guide will help you learn about this business model and give you an idea of how to franchise a business so that you can decide if it’s worth your time, energy, and money.

How Franchising Works

This business model allows you—the franchisee—to run a business under the name of a brand—the franchisor. You’ll have to pay an initial fee to get brand access and support from the franchisor. Depending on your contract, you’ll be allowed to run the franchised business for a set number of years. Franchisees also usually have to pay royalty fees.

Pros and Cons of Franchising

Franchising is a great investment option for people looking to open a business but would rather skip the complex brand building process. But it certainly does not come without drawbacks. Here we lay out the advantages and disadvantages of this model to help you decide if it’s right for you.

Generally, people embark on this venture for the reduced risk of failure it presents compared to independent start-ups. Especially if you plan on investing in an established brand, you could benefit from the peace of mind that comes from knowing you’re capitalizing on a proven business model. You’ll also receive support and training from the franchisor, which means you’re not in it alone.

But the last bit can also get you in trouble when the franchisor runs into problems. Because both of you are in this together, their problems become your own.

Where to Find Franchising Opportunities

Now that you have a general idea of how franchising works, it’s time to check out the options that suit your current financial situation. Quick-service restaurants (McDonald’s, Starbucks, Subway, etc.) make up the largest segment of the industry, followed by full-service restaurants, real estate, and commercial and residential services. If you prefer low-risk investments, you might want to start here.

But while your success is almost guaranteed with these franchisors, keep in mind that their upfront costs and royalty fees are typically higher. For those looking for more affordable options, CNBC suggests venturing in the following industries:

  • Cleaning
  • Home Staging
  • Photography
  • Real Estate Brokerage
  • Vacation or Cruise Planning
  • Weddings and Events

If you want to see which option is best for you, it’s good to seek advice from a franchise consultant. These professionals will also help you assess the franchise agreement, so you’ll have no problem dealing with the legal side of your business.

 Is Franchising Right for You?

This business model is not for everyone. While the idea of becoming your own boss is exceptionally appealing, know that owning a franchise feels more like being a manager than a boss. You won’t exactly have full control over your time, especially during the initial phases of your franchising journey. But with enough capital, right placement, and determination to succeed, nothing can stop you from reaching your business goals.

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