How to Start a Franchise

January 31, 2020

Tired of the usual 9-5 job? Like to open a business but the process seems intimidating? Starting a franchise is an excellent option, but how do you start? To help you assess what is required of you and what you can expect with this kind of business, here’s a primer on how to start a franchise.

Start with Research

First, due diligence is what sets apart a successful franchisee from those who are not. Before you jump all in, it’s wise to be prepared and learn what to expect from a franchising business. Some things to consider include:

Preference. What’s your personal preference? Loving the industry you’re in gives you an edge from the start. Even if you have to put in the time and hard work to build your business, you’ll find joy in every moment of it because it’s something that’s captured your interest.

Skill Requirement. Is there any particular skill set that you need to have to start the franchise you’re interested in? If there is, can they train you for it?

Cost. What is the total cost of the franchise? What’s the required net worth? How much liquid capital do you need to start the franchise? Does this suit your budget?

Business Stability. You’re essentially buying the franchisor’s brand equity as well as their proven strategy and track record so you don’t have to go through the strenuous learning curve yourself. So you need to check how long the franchisor has been in business. Does it have a stellar reputation for providing support to its franchisee?

Existing Market. Is there a growing demand for the products or services you’re going to offer? What’s the general outlook for your industry? It’s best to get into a business where there’s already an existing and growing need for what you’re offering.

Potential Income. As much as you love the industry, you’re not starting a business just for fun. You’re in for the bottom line—profits that will cover your bills and then some. Furthermore, make sure you know what you can expect to earn from a particular franchise and ensure that it’s a number you are comfortable with.

Vetting Process

Next, once you’ve done all the research, you can start the ball rolling by contacting the franchisor you’re interested in. Typically, the franchisor will reach out to you and schedule a meeting. They will discuss extensively the business concept and how to start a franchise, as well as what they can offer you in terms of training, admin support, supplies, and marketing. You will also know which areas you can conduct the business since most franchises have designated areas of operation. You can also ask questions and see if the franchise they’re offering is truly a good fit.

Check Out the Franchise Agreement

Franchise Agreement

When you’re ready to move forward with the process and the franchisor has approved your application, the company will send you a franchise agreement, which outlines everything. Take note that this is a legal document so you should take the time to review all the points of the agreement and that all the promises and guarantees you’ve talked about during your initial meeting are included in the document. Additionally, you may have a lawyer look over this agreement on your behalf for your peace of mind.

Key Provisions for How to Start a Franchise

Provisions for the payment: The agreement will include all the fees associated with the franchise. Make sure all the payment dues are laid out in the document.

Term of the franchise license: This states the duration of the franchise.

Training: The franchise includes a training program to ensure that you learn how to start the franchise well. Make sure also that the administrative and technical support that they promised during your initial meeting is also outlined in the agreement.

Financials: Franchisors usually receive an ongoing royalty fee, which is usually a small percentage of the total income, in exchange for their brand and system. Thus, the agreement usually includes a provision regarding accounting records.

Designated area: During your initial meeting, the franchisor will have discussed the available designated territory where you can operate. This geographic restriction is put in place to protect franchisees and foster teamwork between franchise owners.

Marketing: This should detail your franchisor’s commitment as agreed during your initial meeting. If there are costs involved in marketing, the agreement should also reveal who will shoulder such costs.

Operating Protocols: This part of the agreement details what is expected from you while running the business.

Renewal, Termination, and Cancellation of Franchise: This section of the contract details on how the franchise can be renewed once it expires. It also states conditions under which the franchise can be canceled or terminated.

Resale Rights: This part of the contract deals with what happens in the event that you wish to sell your franchise. The franchisor may also reserve the right to buy back the franchise at a determined amount or they could write in a right of first refusal clause.

Raise the Funds

Finally, before you inked a deal, you need to have the funds needed to pay the franchise price as well as all the fees associated with starting the business. Here are your options when it comes to financing the franchise:

401(k), IRA, or Other Retirement Fund

You can use your retirement fund to pay for the startup cost of the franchise. Typically, you would incur an early withdrawal fee if you do this. But there are ways to roll over the funds to a certain type of account to avoid paying the penalty. A rollover for business startups (ROBS) arrangement allows you to do this for instance. However, if you’re exploring this option, it’s vital that you consult with your accountant.

Home Equity Loan

If you’ve built up enough equity in your home, you can borrow using your home’s equity as collateral. This type of loan typically offers less interest rate compared to a personal loan.

Banks and Other Lenders

You can apply for a business loan from banks or other commercial lenders. To make this process less taxing, you can go to online business financings marketplaces like or These loan marketplaces help pair you with different lending institutions nationwide. This way, you can take advantage of competitive rates and terms.

In-house Financing

Some franchisors offer in-house financing that covers up to 50% of the franchise fee at a fixed interest rate. You just have to talk to the company’s representative and see if they have this option and if you meet their qualifications for it.

Attend Training

Presenter Presenting on Stage at Conference Meeting

Last, but not least, once you’ve signed the agreement and paid the franchise fee, it’s imperative that you arm yourself with all the knowledge and skills necessary to learn how to start a franchise. Attending the franchisor’s unique training program is the best way to do just that. The program can include one or a combination of these:

Online Trainings. Online sessions are usually done to introduce key business concepts. You can complete these trainings in the comfort of your home.

Headquarter/Class Trainings. Some learnings are best done in person and that’s why excellent companies require their franchisees to fly to their headquarters and learn the skills to effectively run the business. Technical aspects of the business is also covered during this training.

Field Trainings. This training allows you to learn firsthand about the ins and outs of the business while you’re out there and doing real fieldwork. This also gives you a glimpse of what to expect while you go about your daily routine and have instructors helping you navigate through those routines.

State Certifications. Depending on the kind of industry you’re in, you may need state certification to operate. The franchisor could help you obtain this.

Comply with all Legal and Regulatory Requirements. In most instances, the franchisor takes care of the state license and FTC registration. However, each state has different licensing requirements depending on your business activity. Just make sure you comply with all those before you open the shop. Typically, the franchisor should be able to help you with this.

Prepare for the Grand Opening of Your Business

With everything ready and taken care of, you can focus on preparing for the grand opening of your business. Additionally, take this opportunity to get your name out to potential clients and customers as well as market your products and services. Ask your franchisor and other successful franchisees for tips on how to prepare for this momentous event.

Franchising takes most of the headache out of starting a business. Moreover, by taking those hurdles that most entrepreneurs face, you can focus your effort and time on learning the skills to operate the business and jump right in with income-generating activities.

One of the best industries to franchise right now is the home inspection. With a projected growth of 10% until 2026 according to the Bureau of Labor Statistics, there is a healthy demand for this service. If you’re interested in starting your own home inspection franchise, please call (800) 967-8127 or email us at and one of our experts will contact you promptly.

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