Opening a franchise is a streamlined way to become a business owner, benefiting from an established brand’s reputation, marketing, and support. However, potential franchisees must meet financial, legal, and insurance requirements before launching their business. The process includes budgeting, researching opportunities, securing financing, reviewing agreements, selecting a location, obtaining licenses, securing insurance, completing training, and officially opening.
Key Points you will find in this article:
- Franchise Benefits: Entrepreneurs gain brand recognition, marketing support, and training from the parent company.
- Financial Requirements: Franchisees need initial purchase fees, liquid capital, and ongoing fees; some brands require a minimum net worth.
- Legal and Insurance Obligations: Compliance with laws, franchise agreements, and specific insurance policies (e.g., liability, property, workers’ compensation) is crucial.
- Steps to Ownership: The process includes budgeting, researching franchises, securing financing, obtaining permits, completing training, and launching.
- Industry Considerations: Franchise selection should align with market demand, industry trends, and personal interests.
It’s time to realize your dreams of being a business owner, and opening a franchise is an excellent way to get started quickly. Not only do you get to take advantage of the parent company’s existing reputation and marketing, but you’ll also receive training and support from the brand owners instead of having to try to figure it all out on your own. Those elements can make a huge difference when you’re ready to launch your business!
There are a lot of options out there, whether you’re looking at opening a fast-food restaurant, a retail store, or something in the financial industry, such as investing in an insurance franchise. No matter which type of business you’re considering, there are a series of unique franchise requirements to consider. Before you jump into purchasing one, make sure you’re prepared for everything you’ll need to take care of along the way.
What Are the Requirements to Own a Franchise?
You’ve got your eye on an existing brand and you’re excited about the industry. However, before you apply to become a franchisee of this brand, make sure you’re prepared for the demands of franchising — especially when it comes to finances, legalities, and insurance. This sets you up for success and avoids any unwanted surprises as you embark on your dream of running your own business.
Financial Requirements
One of the first steps to buying a franchise is ensuring you have the funds to purchase and operate the new location. You have been saving and planning for this for a long time, so make sure you’ve everything is in place to realize your dream, including:
- Initial purchase fees
- Liquid capital to allow you to launch and maintain the franchise while it’s growing
- Ongoing franchise fees, including royalty and advertising fees
In addition, certain brands may ask that you have a minimum net worth requirement to be eligible to apply to be a franchisee.
Legal Requirements
All franchises must comply with state and federal laws as well as any local regulations for businesses operating in a specific area. Familiarize yourself with those requirements before you get ready to launch your business so that you don’t end up backed into a legal corner before you can get your new location off the ground!
An interested owner will also need to sign an agreement that gives them permission to own and operate the new location of the business. You’ll also need to sign a disclosure agreement, which will lay out the terms of operation and any private information from the parent company. Often, this will include confidential information and the terms of using this info.
Insurance Requirements
Don’t let an unexpected situation waylay your goals of being a self-made entrepreneur. The franchise agreement often lays out the minimum insurance to operate the location, including the coverage the business needs to protect both yourself and the company. Common insurance requirements for franchisees include:
- General liability insurance
- Property insurance coverage to take care of the real estate and equipment
- Business interruption insurance
- Product liability insurance
- Workers’ compensation insurance
Individual companies may establish specific insurance guidelines for their franchisees. Those requirements must comply with state and federal laws, but may go beyond them. For example, in California, all businesses with at least one employee must carry workers’ compensation insurance, but brands that operate outside of California may choose to require it for locations in all states — including Texas, which does not require private businesses to carry workers’ comp insurance.
If you want to operate a franchise, meeting the financial, legal, and insurance standards of the parent company is foundational! Not only does it ensure legal compliance (helping you avoid fines or prevent your business from closing down), but it’ll also help get your business off to a great start. You’ll be able to use a proven model for success, which can improve efficiency and reduce errors. Ultimately, you’ll find that this maximizes the potential for your new investment while minimizing the potential risks often associated with a startup.
How to Become a Franchise Owner: 9 Steps to Buying a Franchise
You’ve saved up for years and you’ve got a handle on all the paperwork and forms. Now, you’re ready to become a franchise owner. What’s next?
1. Set Your Budget
Everyone has their own budget needs — and that’s even more true when you’re getting ready to launch into a new business opportunity. Look at your available assets and credit to get a better idea of what you can afford to invest. Not only does that help you pick the right franchise (one that meets your financial requirements!), it can put you in a better position to negotiate terms that will fit your goals for the future.
2. Research Franchise Opportunities
What kind of business do you want to operate? Chances are, you don’t just dream of being a business owner in general. You may have a specific idea of what job duties you want to take on every day or what industry you want to work in. Those are key factors in choosing a brand you’ll love.
Next, take a look at what opportunities are available around you. What brands and services are needed in the area where you want to operate? Are you inundated with locations of a particular parent company already, or is there a brand or service that residents of your area need? You should also consider longevity. Trends change, especially in industries like fast food and retail. In contrast, some — such as the auto insurance franchise industry — are evergreen and always in demand.
As you narrow down different opportunities, contact franchisors and review the parent company’s disclosure document, which will provide you with essential information about the brand you’re considering. That documentation can go a long way toward telling you if a specific company is the right one for your needs.
3. Check Out Financing Options
Most people don’t have the money to open a brand new company just sitting in their accounts. Fortunately, there are a lot of options out there that can help you get the financing you need. Consider Small Business Administration loans and bank loans that can help you get your business off the ground. Some franchises offer financial backing, as well.
4. Examine the Franchise Agreement
Before you sign on the dotted line, do a careful read of the franchise agreement. Make sure you know what the parent company will require you to do and what running your new location will look like. If you have any questions, reach out to a business attorney to make sure you understand all the terms of the contract.
5. Find a Location
You’ve chosen your business’s brand. Now, you have to find the right place to put it. Consider whether you want to own or rent your franchise location, how much space you’ll need to operate the business effectively, and where that brand will perform the best.
6. Apply for Licenses and Permits
Before you can open your business, you’re going to need relevant licenses and permits. Check out local regulations as well as any state or federal requirements.
Remember to apply for the franchise itself! Companies will have an established plan for you to follow as you sign the franchise agreement and get ready to launch your new location.
7. Secure Insurance
Insurance is a vital protection for your new business. Look at the types of insurance you need to protect your new franchise and ensure you have everything in order before you are ready to operate, including workers’ compensation, property, and liability insurance.
8. Attend Necessary Training
The parent company will tell you what training you need to meet their requirements and remain compliant. Don’t put it off! That training can provide you with vital skills that will help you on your way to success as a small business owner.
9. Open the Doors
It’s time to reap the benefits of all that hard work! Get your franchise up and running and start enjoying life as a small business owner.
Discover Franchise Opportunities With Freeway Franchise
Freeway Insurance is a leading name in the U.S. auto insurance franchise industry, backed by the well-known Confie family of brands. We’re thriving in niche markets, offering a proven franchise business model with access to top national and regional insurance carriers. Our franchisees benefit from a wide selection of insurance and related products, strong national brand recognition, powerful advertising support, and top-quality training to help them succeed.
Are you ready to secure the right franchise for your brand? Become a Freeway Insurance Franchise owner today!
Reach out to us at 877-822-3024 or Contact Us to learn more about our exciting opportunities.
