In 2017, there were 745,290 franchise establishments, according to Statista.com. They employed more than 9.1 million workers. There are a number of franchise directories available that list hundreds of franchise opportunities in diverse areas. While some franchisers sell units all across the country, others only do business in a few states. Some of the most successful franchises can guarantee a franchisee great revenue, but these franchise units can require hundreds of thousands of dollars in initial investment.
Many franchisees own more than one franchise unit with a company; some even tie two different franchises together in a practice called "cross-branding." For example, a franchisee may own a pizza franchise, as well as an ice cream franchise housed in the same restaurant. Another combination owners find popular is having a convenience store that also houses a fast food outlet.
Before you invest a cent, or sign any papers, you should do extensive research into the franchise, particularly if it's a fairly new company. There are many disreputable franchise operations, so you need to be certain of what you're investing in. Lawyers and franchise consultants offer their services to assist people in choosing franchises; some consultants also conduct seminars. The Federal Trade Commission (FTC) offers A Consumer’s Guide to Buying a Franchise (https://www.ftc.gov/tips-advice/business-center/guidance/consumers-guide-buying-franchise) and other relevant publications. The International Franchise Association also provides free franchise-buying advice.
You'll need money for the initial franchise fee and for the expenses of the first few years of business. You may pursue a loan from a bank, from business associates, or you may use your own savings. In some cases your startup costs will be very low; in others you'll need money for a computer, rental of work space, equipment, signs, and staff. According to the IFA, total start-up costs can range from $20,000 or less to more than $1 million, depending on the franchise selected and whether it is necessary to own or lease real estate to operate the business. Moreover, the initial franchise fee for most franchisees is between $10,000 and $30,000, with 70 percent of franchisers charging an initial fee of $40,000 or less. The average investment, excluding real estate costs, is $350,000 to $400,000. Some franchises can cost much less.
A new franchise unit usually takes a few years to turn profitable. Once the business has proven a success, franchisees may choose to invest in other franchise units with the same company. Franchise owners may also be able to afford to hire management and other staff to take on some of the many responsibilities of the business.
Tips for Entry
Join the American Association of Franchisees & Dealers and the International Franchise Association to access continuing education resources, publications, advice on buying and operating a franchise, and other resources.
Visit https://www.franchise.org/franchise-opportunities for a list of franchising opportunities in 15 areas (such as business services, food and restaurants, sports and recreation, and financial services).
To learn more about franchising, read:
- IFA FranBlog and Franchising World (both available at http://www.franchise.org)
- Entrepreneur (http://www.entrepreneur.com/magazine)
- The Franchisee Voice Blog (http://www.aafd.org/the-franchise-voice)
- Franchising.com (http://www.franchising.com)
Visit https://www.ftc.gov/tips-advice/business-center/guidance/consumers-guide-buying-franchise to read A Consumer’s Guide to Buying a Franchise.
Read The AAFD Road Map to Selecting a Franchise at https://www.aafd.org/buying-a-franchise/selecting-a-franchise.