Multi-Unit Franchise Experts

Guide to Franchising: Exploring FAQs

The rise of franchising has been a blessing for many corporate executives who’ve been facing layoffs. Franchising offers a reliable path to success as an entrepreneur, providing franchisees the opportunity to own and operate their own business within a supportive network of other franchisee businesses. But before any corporate executive can jump into the franchising business, they must evaluate multiple questions to ensure they’re making the best decision.

The International Franchise Professionals Group (IFPG) offers a membership-based franchise consulting network made up of more than 1300 franchisors, franchise consultants, and vendor members. Together these franchise broker group members give aspiring business owners the help they need to make informed decisions when it comes to investing in franchise business opportunities.

To get started, we have compiled a list of Frequently Asked Questions (FAQs) to help guide corporate executives and entrepreneurs in their quest to become successful franchisees. Read on to learn everything you need to know to make an informed decision on franchising.

What is a Franchise?

A Franchise is a business model where a franchisee purchases the right to start and operate a business using the franchisor’s industry-specific business knowledge and established brand. By doing so, the franchisee obtains the benefit of a simplified business model, the use of a recognizable brand name, and other associated resources such as ongoing operational support, marketing, and purchasing guidance.

How Does Franchising Work?

When a franchisee purchases a franchise, they are granted an exclusive right to own and operate their own franchise business. The franchisor usually provides the franchisee with training, operational guidance, access to their established brand, business systems, and other resources to help the franchisee succeed. The franchisee is typically required to operate under the franchisor’s rules and guidelines, and to share a portion of their profits as royalty fees to the franchisor.

What Are the Benefits of Franchising?

Franchising offers many advantages to entrepreneurs and corporate executives considering a career switch. By entering the world of franchising, you have the ability to get up and running with a proven business model and brand while being able to scale your business quickly. This helps franchisees to quickly start realizing profits and benefit from a support system to help guide their business decisions. Starting from an existing business model also eliminates the risks traditionally associated with starting a business from scratch. Additionally, franchisees have the ability to borrow from banks, and other lenders such as the Small Business Administration, at higher success rates due to the franchisor’s established brand.

What Types of Franchises are Available?

There are a wide variety of franchises to choose from, ranging from restaurants, retail stores, auto care centers to business and professional services. Some of the more popular franchises include fast food restaurants such as McDonald’s and Subway, convenience stores such as 7-Eleven, and home-improvement stores such as The Home Depot.

What Are the Legal Requirements for Starting a Franchise?

The legal requirements to start a franchise vary by state, but all franchisees need to sign a franchise agreement that outlines the obligations and responsibilities of both parties. This may include the details of the franchise fee, the length of the agreement, and other details related to the franchisor’s intellectual property. Additionally, many states require franchises to register with the state’s department of consumer affairs before they can legally operate.

How Much Does It Cost to Start a Franchise?

The cost of starting a franchise depends on the type of franchise business you’re looking to start and the size of the franchise area you choose. For instance, a fast food franchise can range from $150,000 to $2 million, depending on the size of the franchise area and the type of food service you plan to provide. Other franchise businesses may cost less, such as a home improvement or pet services franchise, which can start from around $10,000. However, the total cost will depend on the specifics of each individual situation, so it’s best to speak with an experienced franchise consultant to get a better understanding of the costs associated with a specific franchise business opportunity.

Are There Different Types of Franchises?

Yes, there are two main types of franchises. The first is an “area development agreement”, where the franchisee is provided the exclusive right or license to operate within a specific area or territory. The second is “master franchising”, which is a type of franchising agreement where the franchisee is granted the right or license to recruit sub-franchisees into the franchise system, with the right to operate within a specific region or country.



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