How to Start a Franchise in 2020 – ShoeMoney


There are almost 800,000 franchises in the United States. Among those are licenses from some of the most well-known brands in the world.

Franchising is one of the best ways to start a business in 2020. It mitigates some of the risk by allowing you to plug into an already established brand.

This doesn’t mean you won’t fail. Look around you. Plenty of fast food franchise locations shutter their doors due to poor management. But if you manage your business well, you could be making excellent money for years to come.

Today I’m going to help you start your franchise. Keep reading to find out how.

1. Balance Pros and Cons

Take a step back for a moment. Is franchising right for you?

The pros are fairly obvious. You already have an established brand name behind you. Thus you already have a support network at your back. And the brand has a proven track record so you’ll make money.

The biggest downside? Startup costs.

The brand won’t just give you the license and say, “go to it!” They want you to buy it from them. This could cost as much as a house or as little as a car.

Do you have the capital? Can you get the loan? Are you willing to go into debt?

If the answer is “no” to any of these questions, consider other business options.

2. Choose a Franchise That Aligns With Your Personality

Not all franchises will suit your personality. Do you really want to work in fast food? Are you ready to sell cars and operate such a massive operation?

Sit down and evaluate your weaknesses and then your strengths as an entrepreneur. You’ll need to find a franchise that plays to your strengths.

What are you passionate about. Money may not be everything to you. Find a franchise in an industry you care about and would love to work in even as an entry-level worker.

Evaluate your goals. Will the franchise help you meet those goals? Is it the ultimate goal or is it a paver stone on the path to your eventual success?

3. Protect Yourself With an LLC or Corporation

Without an LLC, if someone sues your business, it falls on you and your investors. They could take all of your personal assets.

With an LLC, your franchise becomes an entity on its own. The lawyers won’t be able to touch your house or your car or your bank account after they’ve ransacked your business.

Oh, and the tax breaks are nice. Those aren’t available to sole proprietors.

4. Research the Market for the Franchise Industry

Don’t take on a franchise that might fail within the next few years. This may seem common sense, but some corporations may not realize they’re flagging financially until it’s too late.

You might have some sort of entrepreneurial instinct. Great! But instinct does not replace raw data.

Look to sources like the Census Bureau and the Small Business Administration. Hire a private market research firm. Get as much information on the franchise as you possibly can.

If you are still lost, hire a franchising consultant. They’ll be your advisor and help you pick through possible franchises.

5. Write a Business Plan

I won’t spend too much time here. I’ve covered business plans plenty of times before. But a business plan will help you organize your action steps from here on out.

Be sure to place a budget within your business plan. The franchises that fail often do so because of mismanaged funds.

The two things you need to budget for above all else are products and franchise marketing. These two things are what will make you money.

6. Obtain Capital

As I pointed out earlier, franchise startup fees are costly. Securing funds for your startup fees could be difficult. Nearly 50% of all business loan applications get rejected the first time.

Sometimes, however, newer franchisors are willing to help you out with early costs. They have a vested interest in their brand succeeding wherever it is. Be sure to find out what kinds of items they’ll cover while you build the franchise location.

If you haven’t built up enough capital, approach friends and family for money. They will be more lenient than banking institutions on repayment and they likely won’t charge you interest.

7. Review the Franchise Agreement and Don’t Get in a Bind

Hire an attorney for this step. Be sure you understand exactly what you’re jumping into.

There might be terms and agreements you think you understand. Yet, when these come into effect, you’ll find yourself in a bind.

A lawyer can untangle the legalese and help you renegotiate the contract if need be. They’ll know what’s common and what’s not. They’ll be able to sniff out the franchisor’s BS before you ever set down your signature and sign your life away.

8. Adhere to Business Compliance Requirements

After you’ve signed your agreement, it’s time to start building. Before you find a location, you need to understand local regulations.

Are there business permits for the city you live in? Do you need a license to operate?

Often you’ll need to register with the local tax organization. If you’re a restaurant franchise, you need to obtain health permits.

If you fail to do these things, you could be shut down. Imagine starting a franchise, getting shut down, and losing all your startup capital. You don’t want this to happen to you.

9. Build or Improve the Location

If you bought an existing franchise, you might need to make improvements. Did the former owner do a good job of caring for employees? Maybe you need to update policies.

If they didn’t care for the building, you might need to use some of your capital to repair the building and make it appealing to customers. You might need to update features such as signs or logos.

And lastly, you might need to hire better employees. Often a franchise fails due to poor employee training.



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