How to Start a Franchise Business? Step By Step Guide

franchise business process
Start a Franchise Business

Franchise Business in India has shown Rapid growth in recent years. There is a recent growth of about 30-35% in the Franchise Business, which means a huge potential.

A Franchise Business takes aspects like operations and distribution from another successful business. It takes the brand of another business and works under its compliance.

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Introduction to the Franchise Business

Franchise Businesses are becoming popular. Though it may seem very profitable there are a lot of things that happen at the backend. So, if you are looking for a complete guide on How to start a Franchise Business in India, then you are at the right place.

A Business model consists of a franchise running a franchisor’s business. Here, the raw material delivery, business model aspects, and a lot of operations take place in the franchisor’s way.

The franchisor’s brand plays a vital role in core activities and brand awareness. Before starting with a complete guide, let’s take a look at the Different types of Franchise Businesses available in India.

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You need to know every type of Franchise Business. Understand where your expertise lies, to make the right decision for your own Business

1- Business Format Franchise

In this type of model, the franchisor will let the other franchise owner use its trade name, products, and services.

The operation details are also used by signing a common agreement. It is a popular type of Franchise Business Model Example: Subway (A restaurant chain)

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2- Conversion Franchise

As the name suggests, conversion franchises are the types of businesses that were before owned by independent owners. They later converted under the franchisor’s trade name.

They adopt standards like client servicing, marketing, and training system from the franchisor. The franchisor gets a royalty fee for this. Example: Home service business, real-estate business.

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3- Job-Franchise

The most low-cost handling model is a job or operator franchise. This type of franchise is usually run by one person that needs minimal equipment, and vehicles.

This results in low operating costs. It’s the most common and they usually operate in one industry. Examples: shipping services, and dry-cleaning services.

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4- Investment Franchise

This needs huge Investment for a large chain of franchises like a Restaurant. The franchisee will not take part in the daily operation but due to heavy investment, they will take care of top-notch management.

Apart from that arranging the best management is also a part of the work. Examples: Restaurant, Event Planning.

5- Product Franchise

The most common is the product franchise. It was started in early 1800 by a singer corporation for its sewing machine. Here the franchisor allows its products to get distributed with its trademark by getting a fee in return.

Example: Coca-cola

Now that you have got a complete idea of what can be your targeted type of Franchise, let’s get you to the ultimate destination that will give you a clear idea.

Steps to Start a Franchise Business

Now you will see a detailed and step-by-step process to start it. Take note of every point and at the end of this article, you will have a crystal clear idea to do it better.

1- Research Franchise Options and Opportunities

It can be overwhelming but skipping this part can cost your wallets. But before you start the venture, you must go to research the options and opportunities available in the market. Go on the internet, consult with experts, and also participate ins some events to get to know things.

Your vision and expertise combined will help you understand the best franchise option for you. A consultant will be the right person. See the type of economy you are planning to enter and the opportunities it holds

2- Study Target Market and Competition

What can be your target Market? Who can be your potential customers? This question has one answer- “the one who finds the solution in your products/services at the right time and the right place”.

Remember your target audience and market can be different from the franchisors. Once you have a picture of your customer’s pain point you need to start looking for possible solutions.

See if your business has the solution and also if your competition has already done it or not. Your competition will pretty much give you a clear path to running your business. Study how they solve and what loopholes you can cover.

3- Choose A Franchise that Fit Your Goals

After analyzing the industry and competition it is now time to choose the best fit for you. You will find much successful franchise options but you may choose the one that suits your goals.

Your goal can be expanding your business. In such a case you cannot risk choosing a business that earns profit but you have no expertise.

It will not be sustainable Choose a sustainable franchise that shows you hope and growth every quarter.

4- Check Costs and Arrange Finance

A Franchise business needs a one-time investment in the right way. The important aspect of this also lies in getting funds. Thanks to the popularity of the business and the reach of Franchising, you can now get funds even if you are in Tier1,2,3 cities.

Start with the basic investment you can get personal. Try to make a personal balance sheet. Find out how will you pay for your royalty fees, manpower, operations, etc. Later comes, “who will fund your franchise?”.

A variety of financing options are available. From Bank loans to angel inventors. You may also opt for venture capital, private equity, and also soft loans from friends and family. If it is far big than a small one, Partnership Franchise also helps in funding and finance.

5- Create a Business Plan

Creating a Business plan is far beyond your funds and financing. You need to make sure you are capable of handling and growing a successful Business. You need to convince the same franchisor.

Don’t make a book of plans that no lender will be interested in. Instead, focus on compiling proper information that states your method of having a franchise business over an independent one.

A franchisor will also sign an FDD, i.e. franchise disclosure document. This will mention the company’s background, target market, competitors’ advantage, the cost that is ongoing, and much more in detail.

6- Determine a Good Location

To run your Business successfully, you need to find the best location for your franchise. It should be such that it reaches the target audience. Consider these points while you choose the best location.

Think of the future value of the place Take your Franchisor’s help in finding the best as they have the needed resources See where your target audience hangs out more. Consider a crowded target audience area.

7- Business Registration and Licensing

To start with the process, file documents with the Ministry of Corporate. Your franchisor will know the license you will need to run in a particular industry. Apart from the usual business license, some industry has specific license like FSSAI License for restaurant franchise.

Once you are done with license filing, take ownership. During all the legal procedures, it is advisable to take 2 eyewitnesses.

Taxation in India is also vital whether you file custom taxes or GST. Make sure you have legal help to avoid heavy taxation for your franchise

8- Hire a Good Team and Required Professionals

Prepare a team of professionals who can take care of your operations in your absence. Your Investment in Human resources can be time-consuming, looks easy but has a long-lasting impact.

You do not want to increase the cost of your hiring process every now and then. Build a team that understands your vision and contributes its best to the same. A professional team of managers is also needed when you have a growth perspective.

9- Follow Business Compliances

Franchise business is well recognized by the business compliances it follows in its every store/service. To preserve this you must have a good team that adheres to the business guidelines.

Business Compliances are first judged through verbal communication. Whether it’s a business conversation or talking to your customers, everything should be taken care of.

If you follow it for consistent brand growth, you will soon develop a strong framework that will be adaptable.

10- Growth Strategy and Monitoring your Franchise

To have a successful and profitable franchise business, you need to focus on the metrics of profits for your business. Your profit metrics can be sales revenue, net profit margin, and much more.

Have a monitoring system monthly or weekly to ensure a continuous flow of smooth business. This way you can have complete control over your business and you also have an undisturbed profit incoming.

You have the button to start your Business by now, but that’s not it, right? To make your decision-making easier, let’s dive into some quick Advantages and Disadvantages.

Advantages of a Franchise Business

  • Already Built Brand recognition: Since you are not building a business from the scratch, you get everything done. Franchisor has already built a brand so it is easy to expand.
  • Failure Rate is low: Since most of the Franchise business is because of the success of the first one, it is nearly the case that you fail. It is built-in on a tried and tested model.
  • Customer base is built-in: Your customer already knows you and your business. It is another location for them to try your products/services.
  • The promotion and Advertising load are minimal: The franchisors will take care of promoting and advertising. You get quality advertisements without doing anything
  • Growth and Expansion are possible quickly: International expansion is possible with the help of a huge business market.

Disadvantages of a Franchise Business

  • Dependency of decision: Though you become the owner of your business, you still do not get the right to make independent business decisions.
  • Negative advertising: Advertising, if done right has more benefits but one negative brand mark can affect your independent business as well.
  • Lock-in time: If you think you will run the business for success and shut it when you see loss, then unfortunately you are wrong. The franchisors have a lock-in period where you are asked to operate whether you face loss or profit.

This Business has both Advantages and Disadvantages. If you are someone who thinks can make a Franchise Business blow in India to become the next successful one, do give it a shot.

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