Opening and Operating a Franchise

Opening and Operating a Franchise

by Stephanie Morrow, December 2009

Thinking of starting a business, but afraid to start from scratch? If so, open a franchise. You'll lessen the risks of starting a company while reaping the benefits of operating your own business.

What is a Franchise?

By definition, a franchise is a legal and commercial relationship between a franchise owner and a franchise operator. The owner owns the trademark, trade name or advertising symbol, such as Dunkin' Donuts or McDonald's. The operator pays the owner to use that identification to open and run a business.

Generally, the owner takes care of the essential parts of the business: supplying goods or services, marketing assistance and plans, management, financial assistance, training, location for the business and even more. This is very beneficial for the operator. Since these areas are covered, less work is required to establish and run the business.

Should I?

The critical step in opening a franchise is deciding whether or not it is right for you. If you want to stop working for someone else, a franchise may not be a good fit. As an operator, you are not completely free to do as you please. Generally, the owner requires you to follow certain procedures, such as business practices, hours of operation, dress codes, and more.

If you think opening a franchise instead of starting your own business will save you money, think again. Not only will you have to pay the initial franchise fee, most franchise owners require you to pay them a percentage of your monthly sales. Some franchise owners require you to purchase your products directly from them, no matter what.

Check Out the Competition

Once you've decided to open a franchise, figure out what type of business you want to go into. Find out which markets are saturated and which markets are lacking in your area. Once you choose your type of business, check out the competition. Do they stay busy? Are they lacking in customer interest? These types of questions will help you predict the success of your franchise.

Do Your Homework

Once you have selected the right franchise for you, make sure you receive the Uniform Franchise Offering Circular. A disclosure document required by FTC Rules, it reports each franchise's background, financial history, termination statistics, purchase requirements, training, and more. This valuable information will help you determine whether or not the franchise is worth joining.


If money is a factor for you, check into franchise opportunities that offer financing. If your franchise isn't one of them, banks and other lenders provide loans for your franchise fees and other startup costs. Using personal or business credit cards or borrowing from a family member are other financing options.

Have Fun!

Throughout the process of selecting and purchasing a franchise, remember, choose a business that you will enjoy running years down the road. High profits and business growth are exciting for a while, but chances are if you don't enjoy what you're doing, you won't stick with it for long.

Opening and operating a franchise is a wonderful way to run your own business. Just make sure to do your homework and cover all bases before you take the plunge.