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11 Key Steps in Opening a Franchise

11 Key Steps in Opening a Franchise-1

Opening a franchise business is a big venture for those who choose to undertake it, and it can be somewhat intimidating. But fear not! Because here we’ll provide a step-by-step overview of the major stages along the way to franchise ownership. Please note that the investment process has some variations from company to company and timelines vary between systems.

1. Self-Evaluate

What appeals to you about opening a franchise? Are you ready, willing and able to work long hours, including weekends and holidays? Can you commit to following predetermined business methods with very little variation, if any variation at all? These are just a few of the questions you should be asking yourself before you begin the franchise process. Here is a checklist with more questions to help you evaluate your suitability for becoming a franchisee. Once you’ve determined you’re up for the challenge, you can move on to step 2.

2. Pick a Franchise Consultant to Assist You (Optional)

While this step is optional, it is highly recommended. Despite all of the information available online, it is still a good idea to enlist the help of a franchise consultant to guide you through the process. Franchise consultants have industry-specific knowledge and can sort through complicated topics, like the legal aspects of agreements and disclosure documents, to help you understand them more fully. They can also steer you away from experiencing potential pitfalls that could happen without their expertise.

3. Do Your Research

What kind of businesses can your area sustain – and are those the types of businesses you’re interested in opening? Federal and provincial governments provide free access to business statistics and other data. Use the information you’ve gathered to match up your personal situation and the business environment of your area with a suitable franchise system. Once you’ve narrowed down your search, request the franchise application from those companies. After the company decides that you could be a good match for their system, they will send you a copy of their Franchise Disclosure Document (FDD), which will give you a deeper look into their business system.

4. Attend a Discovery Day

A discovery day is an in-depth meeting between the franchisor and one or more potential franchisees. It can take place at a local outlet, but most likely will happen at the company’s corporate office. Often, the franchisees in attendance will see presentations about what the franchisor can offer in terms of support and will be able to ask questions. If done at the corporate office, a tour of the different departments and introductions to franchisee training and support personnel are common. 

5. Speak to Other Franchisees

Within the FDD provided by the franchisor is a listing of all current franchisees in their system. Find a few that are close to you and pay them a visit. Are they satisfied with the franchisor’s support? Is the reality of the business in line with prior expectations (financially and otherwise)? Find more questions to ask current franchisees here.

6. Find a Suitable Franchise Location

If you’re located in a low traffic area or an area where there are no complementary businesses around, how are you going to get customers? This is just one thing to consider when choosing the right franchise location. The franchisors will use the FDD to delineate certain parameters for your territory. In addition, most franchisors assist with site selection. If you choose a suitable place for business on your own, the franchisor will have to approve your location before you can move forward.

7. Choose a Franchise and Secure Funding

After you’ve completed your research, it’s time to make the big decision – which franchise system will you invest in? Once you have decided, you’ll have all of the information necessary to complete a business plan and present it to potential lends. There are numerous financing options out there for you to consider: bank loans, Canada Small Business Financing loan, federal and provincial lending programs, etc. Remember, you’ll need enough cash reserves to cover expenses until the business begins to turn a profit, which in some cases can be months after opening.

8. Sign the Franchise Agreement

While many franchisors have a rigid franchise agreement, some franchisors may be more flexible about negotiating terms in the agreement. If the franchisor is willing to negotiate certain terms (like lease parameters), it’s a good idea to seek counsel from a lawyer with franchise-specific experience to find the best solutions for your particular situation. If the franchisor does have a rigid franchise agreement, that isn’t a cause for concern. Remember, franchises are based upon a proven system and consistency of the brand. If the franchise agreement for the brand you chose is overly negotiable, it could be cause for deeper investigation.

9. Obtain All Necessary Permits and Insurance

Each industry has its own requirements for permits and insurance. Regulations by city and province will vary as well. The franchisor will likely have background knowledge of the permits and insurance needed to operate their business system. However, it’s a good idea to check with local authorities to ensure compliance. Two good websites to use as a reference to what permits and insurance might be necessary for Canadian businesses to obtain are the Canada Business Network and Industry Canada’s BizPaL.

10. Hire Staff and Attend Training

The number of staff members needed to run the operation will depend on the type of franchise. One of the most appealing aspects of franchising to those wanting to open a business is the training component. Franchisors usually provide training in a combination of classroom and practical experiences to at least the franchisee and another manager. A copy of the franchise operations manual is also typically presented at this time.

11. Open Your Franchise

Now it’s time to open your franchise! You will need to let potential customers know that you’re open for business. Franchisors will often have defined processes for signage, ads, and other marketing initiatives to be performed. Estimates for these initiatives will usually be a part of the start-up costs quoted in the FDD. Some franchisors will do a 'soft opening' before the 'grand opening'. A soft opening is designed to smooth out problems with the operation of the business before the big marketing blitz and hopefully larger crowds that will come with the grand opening. Some franchisors also arrange for a corporate trainer to be on hand at the franchise location during the opening days.

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