Ready to Start a Franchise? Ask These 3 Questions

There has never been a better time to start a franchise than right now.

By the end of 2021, franchising was predicted to recover to nearly 2019 pre-COVID levels across most metrics. This outlook was shared in the International Franchise Association 2021 “Economic Outlook For Franchising” report. 2021 saw a net gain of 26,000 franchised small businesses. These locations added nearly 800,000 new jobs to the economy. A great deal of employment centered on retail, food, and services industries. In addition, franchises contributed $477 billion to the United States GDP in 2021.

There’s a bit more to starting a franchise than simply declaring you’d like to join a franchise chain. Entrepreneurs that start a franchise will need to ask the following questions. The answers will determine if starting a franchise is the right choice — or if they should start a small business.

1. Are You Financially Ready to Start a Franchise?

Can you afford to start a franchise? If you decide to become a franchisee, you will need a significant amount of capital to cover expenses. This includes, but is not limited to, grand opening promotions, a building space lease, business insurance, business licenses, purchasing or renting equipment, and paying employee salaries.

You’ll also need to pay for the initial franchise cost and fee requirements. Most franchisees, for example, must pay a percentage of the company’s sales to the franchise’s corporate office. This is known as a royalty fee.

Financing a franchise is a bit different from financing a small business. Small businesses may receive funding through a wide variety of resources ranging from business loans to bootstrapping and venture capital. A franchisee may take out a loan through the U.S. Small Business Administration (SBA) or use a business credit card to fund a franchise. Entrepreneurs may also use Rollovers for Business Start-Ups (ROBS), a form of 401(k) business financing, in the event they would rather not take out a loan.

Take a moment to speak with a franchisor. Ask about available financing options and any hidden fees or expenses. The franchisor may be able to share some resources for loans or reductions in down payments. What if you don’t have enough capital for a traditional brick and mortar storefront? Ask about low-cost franchise options like kiosks and vending machines.

2. What Are Your Interests and Areas of Expertise?

Currently, there are more than 750,000 franchises in business across the United States. However, this does not mean you need to start a franchise that is strictly a popular fast-food chain. Consider looking into other industries, especially those that interest you. A few options include health and fitness centers, cleaning services, real estate, and convenience stores. Search for even more franchises across a wide range of industries using Franchise Registry.

As you lean into finding a franchise that interests you, think about one where you can use your existing skills and strengths. If you have years of experience in a certain field, such as teaching, you may decide to buy a franchise that specializes in tutoring or learning services.

3. Are You Ready to Work Hard?

Buying a franchise may appear to be slightly less work than starting a small business. Many franchises have built-in brand recognition. The infrastructure of a franchise is often referred to as a “business in a box.” This is due to the systematic method of franchises. Brand name recognition, along with a proven track record, leads many to believe there is less risk in starting a franchise.

However, the truth is starting a franchise is just as much work as starting a small business. You will need to work hard to get the franchise up and running. Once it is in operations, you will also need to train and manage your staff to ensure the franchise meets customer expectations. Speak with a franchisor about the average amount of time a franchisee puts into their franchise each week. This will give you a better understanding of the time and energy you’ll need to set aside for this business venture.

I’m Ready to Start a Franchise!

Did you answer each question above and feel confident that you have what it takes to thrive with a franchise? Once you determine the best franchise opportunity, it’s time to get going with this business venture.

Meet and interview with a franchisor. Use this time to ask them questions about franchise ownership. Learn what kind of training they provide and what it’s like to run a franchise on a day-to-day basis. Then, review a copy of the Franchise Disclosure Document (FDD). The FDD is a comprehensive set of guidelines broken down into 23 parts. You’ll be able to learn more about the franchisor, the franchise and its offerings, and the overall financial growth of the franchise in the FDD. After, you may complete and submit a franchise application. Once the application has been approved, review the franchise agreement with a trusted attorney or legal professional. Then, sign the agreement. Get ready to open a storefront, attend training sessions, and start hiring employees. Your franchise is now in business!

Remember that a franchise must be incorporated as a registered business entity. You may choose to incorporate as an S Corporation or form a limited liability company (LLC). Ultimately, this entity will depend on the needs of the franchise.

We can assist you with incorporating your franchise and keeping a franchise in good standing. Give us a call at 877-692-6772 or visit at