You’ve probably heard the word franchise and most likely have even been to one yourself.

Think McDonald’s, Subway, Hilton Hotels, or even a UPS store. 

But did you know that owning a franchise business can be highly lucrative? It may come as a surprise, but it is one of the fastest-growing business models that many entrepreneurs are choosing for their next business venture.  

In 2022, the International Franchise Association (IFA) estimates a growth rate of 5.7% from the previous year, with a total of  775,000 franchise establishments in the U.S. contributing almost $787.7 billion to the US economy. While in Canada, the franchise market is also steadily growing, with 76,000 franchise locations across Canada in 50 different sectors. With growth happening in the franchise industry, it is quickly becoming an ever more appealing industry for people looking to expand their business potential. 

Are you an already established entrepreneur or someone who wants to put their business skills to good use? Then opening a franchise business could be the perfect career evolution for you.

This article will cover everything you need to know about how to open a franchise with practical steps. Follow along as we uncover the world of franchising in this and our other helpful guides on franchising, business, and home health care.

Table of Contents

What is a Franchise?

A franchise is a type of business model where products or services are distributed through a business that is owned and operated by a franchisee. The corporate franchisor handles the set-up of the business name,  trademarks, and overall business systems and processes. At the same time, the individual franchisee operates the business under the franchisor’s name and that proven business model.

Franchise owners

Commonly, the franchisee pays the franchisor an initial fee and licensing costs, along with recurring royalties, while continuing to use the franchisor’s brand name and systems. This agreement allows the franchisee to buy and operate a business with the benefits of having the support of a parent company. 

An example of a well-known franchise restaurant is Subway. Typically many Subways are franchises, which means each franchise owner pays the Subway parent company for the use of their branding and franchise system, which has proven to be a highly successful business model.  

Overall, a franchised enterprise can offer individual franchise owners the best of both worlds: being an owner and operator of their own small business while also having the support and name recognition that only large brands can offer.

What Are the Different Types of Franchises?

When looking into how to start a franchise, you may be overwhelmed by the number of franchise offerings out there. Franchise choices span many industries, from fast food, automotive, and real estate to cleaning and home health care services. Franchise brands will usually fall into four main categories of franchise business models: 

Job-Franchise—In this owner-operated franchise, the owner primarily does the work in a home office instead of at a physical storefront. They have minimal employees, usually less than five. The startup costs are lower due to not needing things like property leases, external office space, or high amounts of inventory.  

Business examples:

  • Window cleaning
  • Event planning
  • Lawn care
  • Home travel agent

Management or Business Franchise—This is the most common type of franchise business model. The franchisee operates their business under the franchisor’s name and systems. They primarily oversee the franchise using their leadership skills to manage employees, inventory, and the franchise location. This franchise business model usually has higher franchise fees and capital costs.

Business examples:

  • Fast food
  • Restaurants
  • Retail stores
  • Elderly Care

Product Franchises—Sometimes called distribution franchises where a franchisee distributes the franchisor’s products through the parent company’s brand name but may not have access to the business processes. The products are usually more specialized and larger in size.

Business examples:

  • Automotive parts
  • Vending machines
  • Appliances
  • Computers

Investment Franchise—This type of franchise model usually requires significant investment costs. The investor or franchisee, in this case, would not be working the day-to-day operations. Instead, they would already have an existing team in place to handle the operations.

Business examples:

  • Hotels
  • Large restaurant chains

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Why Own a Franchise?

The idea of becoming a small business owner is an exciting opportunity. 

For many, it can allow greater access to financial freedom—offering people better control over the trajectory of their life, career, and overall time. However, unlike starting a business from scratch, owning a franchise can provide some unique advantages compared to starting a business completely on your own. Some of those advantages include:

A ready-made business formula and processes, which is half the work already done for you.
Market-tested products and services so you can start selling recognized products or services right away, allowing you to meet your business goals more quickly.
Existing brand name recognition right out of the gate, reducing the need for lengthy brand awareness campaigns. 
Big company benefits yet can still work independently as a small business owner. 
Already established support systems, such as other franchisees and access to corporate business coaches. 
Easier access to funding as you are connected with a big-name company with a history of success, making it easier to access loans. 
Less financial risk due to the business being built up after many years and systems already tested. 

Franchise locations worldwide

However, buying a franchise may not be for everyone, and some may want to own their own business outright. Some disadvantages to owning a franchise can include: 

  • Less flexibility with marketing and promotional campaigns; this may not suit someone who likes limitless creativity and autonomy.
  • Ongoing royalty fees for access to the franchisor’s business model and systems.
  • Sometimes higher startup costs and fees due to initial and ongoing fees, specific inventory, training, and acquiring of a physical location. 

How Much Money Do Franchise Owners Make?

This is the age-old question that prospective franchisee owners will be asking at some point in their franchise research. 

Unfortunately, the answer is not as straightforward as one may like; this is especially the case when trying to include all franchise types into one answer. 

Instead, we recommend when researching the right franchise to partner with, ask to see their Franchise Disclosure Document (F.D.D.). This whole document is important, but if you jump to line 19, it will show the potential profitability of a new franchise. 

For this article, we will stick to general factors that most affect franchise sales:

Business Knowledge

One of the main draws to owning a franchise is having access to the franchisor’s support, resources, and guidance; however, personal business expertise is also essential for your success as a franchisee. If you already have some prior business experience or knowledge, you’ll be better equipped to lead your franchise to success. It is one thing to be given resources but another to be able to implement them well. 

Work Ethic

Another key factor successful franchisees have is a strong work ethic. When buying a franchise, you’ll gain access to many tools and systems, but ultimately it still takes hard work to get the business set up and running smoothly. Like any business, it takes time to establish oneself in the market, which is why putting in the effort is necessary for most franchises, especially during the start-up phase.  

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Location

Location, location, location! You may have already heard that the physical location of a business can make or break it, and franchising is no different. When looking into purchasing a franchise, ensure you look at the demographics, competitors, and overall local business statistics of your desired location to determine how successful your franchise may be. 

Revenue Streams

A common mistake of many business owners is not diversifying their revenue streams. Even with franchising, it is important to find out early on whether the franchise you’re interested in has access to multiple revenue streams. 

For example, at Nurse Next Door, which is a home healthcare business, our franchisees have access to multiple streams of revenue. Franchisees collect payment from not only their private pay clients but also from insurance companies and other organizations such as Veterans Affairs. 

Before purchasing a franchise, find out how they diversify their revenue streams.

How Much Money Do You Need to Open a Franchise?

The amount of investment capital needed to buy a franchise can vary greatly depending on the type of franchise. The usual investment costs for purchasing a franchise can range from $10,000 to upwards of $1 million. 

When conducting your franchise research, ask for a breakdown of not only their franchise fee but also the additional start-up costs you can expect. It is important to take note of how transparent a franchisor is at the beginning, as this can be a telling sign for prospective franchisees about how the franchisor runs the business as a whole.

10 Steps to Opening a Franchise Business

1. Decide on a Franchise Type

With there being so many different types of franchises, you may feel overwhelmed with the number of options to choose from, which is why it pays to do your research. Think about your skills, passions, experience, and even personality when deciding on the right franchise business for you.  As well, think about if you are starting this business just on your own, as a partnership, or maybe even as a family franchise business. 

A good place to start is by looking at a franchise directory like Franchise Direct, where you can search for franchise businesses based on your ideal investment amount, locations, and industries.

Tip: Reach out to the franchise company or other franchisees to find out information not readily found online. 

2. Do Your Research

Once you have narrowed down your list to a few franchise options, start researching the market conditions. While it may be your dream to open a restaurant in your town, you’ll need to determine if you’ll have enough customers in your desired area to make your franchise business a success. Some questions to consider when doing market research: 

      • What are the demographics of your desired area? 
      • How many competitors are there?
      • Are the competitors doing well?
      • What are the industry trends?

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3. Take part in a Franchise Discovery Day

A great way to discover more about a franchise is to attend a company’s franchise Discovery Day and start the discovery process. 

You’ll have the opportunity to learn more about the franchise’s company culture, systems, values, policies, and the type of people already working there—this is also an excellent time for the franchise to start getting to know you. Not only do you need to make sure the franchise is a good fit for you, but the franchisor will want to confirm whether you’ll be a suitable fit for a partnership with them. 

Franchisors prefer if you come prepared with questions and information you’d like to know. You’ll use that information to help you decide if this is the right business opportunity for you. If you like what you see after the discovery day, then you’ll be invited to fill out a franchise application form. 

Tip: Ask to receive a copy of the Franchises’ Disclosure Document (FDD). This document outlines 23 key pieces of operating information to help prospective franchisees make an informed decision before purchasing. 

4. Write a Business Plan

As a part of the application process, the franchisor will ask to see a business plan along with any lenders when trying to secure any necessary business loans.  

It will be important to show that you have a well-thought-out plan and show that you know how to implement the strategy. Some sections to include in your business plan are: 

      • Your background and qualifications
      • Market research
      • Product or service research 
      • How will you manage the business?
      • Your team’s information
      • Marketing Plan
      • Financial forecasting

Tip: Since this document will be shown to potential lenders and other stakeholders who may not know anything about the franchise, ensure you provide all the business details as if you are starting the business from scratch. 

5. Source Funding

Your business needs a sufficient amount of starting capital to fund your franchise’s initial fees and costs to get the business up and running. 

Franchisors want to know you have a good understanding of where you will be sourcing your funds from, so do your due diligence at this step to secure your franchisor’s confidence. Keep in mind start-up fees are different from your usual business expenses, such as employee wages, insurance, and taxes.  

Some financing options include: 

      • Stocks and bonds
      • Loans
      • Savings
      • Friends and family
      • Crowdfunding
      • Your small businesses or investments
      • Your liquid assets
      • Franchisor financing options

Talk to Nurse Next Door Today About Financing Options.

Franchisors usually have existing lender relationships, which can speed up the loan approval process and increase your chances of receiving the loan. For more detailed information on financing your franchise, take a look at our financing guide. 

6. Review the Franchise Agreement

If both you and the franchise company have qualified the other and would like to secure the partnership, they will then provide you with a franchise agreement. 

This agreement will be your legally binding business contract, so it will be imperative you read it thoroughly and agree to the terms. Many prospective franchisees will consult a franchise lawyer who has experience in this field. A franchise attorney or lawyer will have the knowledge and expertise to help you understand the various franchise laws and franchise fees within the agreement.  

7. Set up Your Business Infrastructure

Once you have signed the franchise agreement and have become a franchisee with your chosen company, you can now begin the exciting part of setting up your business! 

The franchisor will provide a guide with important set-up steps like starting an LLC, obtaining licensing and permits, and hiring employees; however, you will also want to refer back to your business plan.

8. Take the Provided Franchisee Training

Alongside the business setup, you’ll want to attend the training provided by your franchisor. In this stage, you and your employees will learn all the necessary corporate rules, the upcoming marketing plan, and all other applicable information needed to set you up for success as a new franchise owner. 

At training, you’ll gain access to the franchisor’s rich database of resources and learn in detail about the franchisor’s brand, culture, and systems. Many franchises will have ongoing training to keep you up to date. For example, at Nurse Next Door, we immerse our new franchisees in a 5-day intensive training program and also provide ongoing coaching and support. 

9. Join Community and Networking Events

Attending the franchises’ community and networking events is a great way to prepare for the launch of your business. By building the comradery early on with other franchisees, you’ll have a support system of peers to ride the waves of challenges and successes together! 

Many franchisors will have company events both online and in person that will allow you to get to know your fellow franchisees and other professionals to start building strong connections early. 

10. Prepare for Opening Day

When the time has come to launch your business, you’ll want to prepare well for your opening day.

The franchisor will have a general corporate guideline to follow, but you’ll also want to add some of your own touches to make the launch of your franchise as special and exciting as possible. It is an excellent opportunity to draw in your target customers immediately and make a name for yourself. 

Tip: To generate excitement for your opening day, you can hand out flyers in the neighborhood, utilize social media ads, and even contact media outlets. Make the day even more exciting by hosting a grand opening party where you can offer discounts for signing up or purchasing on opening day!

Want to Learn More About Opening a Franchise?

If you’ve made it this far and still want to discover if franchising is right for you, then you’re in the right place! 

While there are many franchise opportunities to choose from, many feel that opening a franchise in the home healthcare industry is one of the best options for accessing financial independence. 

With the rise of aging baby boomers, home health and elderly care franchise owners are seeing an increase in their customer base. Not only that, but many franchise owners in this sector are finding purpose in their life by being able to help people live and age happier.

Sign up today to access your Nurse Next Door Welcome Package which includes: 

      • A Discovery Video – 15 min overview of this franchise opportunity
      • Franchisee Testimonials
      • The Nurse Next Door opportunity
      • Access our calendar to book a 1×1 call.

Our representatives are available by phone at 1-855-737-6803 to help you learn if opening a home healthcare franchise is right for you! 

Access Your Welcome Package Which Includes:

  • Discovery Video – 15 min overview of this opportunity
  • Franchisee Testimonials
  • The Nurse Next Door opportunity
  • Access to our calendar to book a 1×1 call.
Watch Now