You run a business, which is growing and doing well for you. You’ve always wanted to expand your business to multiple cities/countries and you are waiting for the right time. In short, you are looking towards franchising your business.

Just like marriage, franchising your business isn’t something that you should speed into. This is because, it’s a lifetime decision and with a lot of business owners failing to do it by obviously going about it the wrong way, it’s really important for you to do your research, in order to franchise your brand properly.

There is a lot of legal stuff that goes into becoming a franchisor, such as getting the legal paperwork done, scrutinizing the trustworthy franchisees, scheduling royalty payments and not to forget various other challenges that you would have to face as you move through the entire process. However, this doesn’t mean that the idea of franchising for your business is all wrong, in fact if done the right way, your business can become the next big brand like KFC or MacDonald. The question is what should you do and how you should go about the entire franchising process for your business?

Given below are the 5 essential questions you must ask to become a franchisor:

1. What resources to look into as a beginner?

According to Joel Libava, a franchise adviser and author of becoming a Franchise owner (Wiley, 2011) , based in Cleveland, recommends that you research the appropriate franchise development company or consultants, who are experienced in offering franchise consultation services to the interested businesses. They would set you up on the right track, and can also in fact pair you with the potential franchises when the time is right for you.

However, you need to remember that these professionals would charge a high fee, around $50,000 to $100,000 or even more.

The IFA (International Franchise Association) is also quite useful for getting up to speed on franchising, as it offers a handful of free and fee-based education resources.

2. What is the estimated startup costs required?

The startup costs can range between $100,000 to $150,000 and even more, costing you the amount of marketing, legal and operation procedures for only launching your Franchise from Day 1. You cannot cut financial corners, if you are to succeed and turn your great business into a great franchise for yourself.

After the initial payments, you are required to pay the professional consultation fees, franchise location design, equipment, and construction. Initial inventory and insurance costs come next. This means that your expense list would continue to become bigger as you move through the franchising process.

3. How much of Franchise Royalty Payment Should I Charge?

Well, this depends on how much money you’ll be earning from franchising. In a majority of the cases, there is a pre-agreed rate cut of the gross sales, between 4% to 6%. However, there are some cases, in which the royalty rate is as high as 25%. According to Libava, a 5% rate is quite normal to charge for licensing the opportunity to use your brand and everything it entails.

The Royalty percentages are collected on a monthly basis, along with a one-time franchise fee, which is usually between $30,000 to $35,000. The fee includes the cost of purchasing a license and the cost of entry in order to operate a business. For the advanced master franchises and developmental deals, it can exceed $100,000.

4. How much will I make?

There is no exact number as an answer to this question. This usually depends on the profit margins and how successful your franchise business really becomes. However, to make your confusions clear, Libava gives this perfect example,” If you are a franchisor with 500 franchises, each of who own a store, that makes $500,000 on a yearly basis in gross sales, and you are charging 5% royalty fee from each of those franchise every year then, you would get $25,000 a year multiplied by the 500 franchises. It becomes $12.5 million, a good enough amount really.”

5. What basic legal considerations do I need to be aware of?

Well, franchising a business requires a lot of complicated legal issues to deal with in the first place. This is why; the best way for solving all the legal issues is to get consulting with an experienced attorney, who has expertise in the franchise law. You also need to keep in mind that certain states have registration laws that you need to abide by to have your business franchised the legal way.

The franchise business offers its investor’s great assurance of the profitability, compared to the startup businesses, as it comes with a brand name that instantly starts making sales. Also, the risks are reduced as they are associated automatically with an established company, helping the owner to earn profit quickly when compared with the other business situations.

How can you benefit from the Franchise as a Business Owner?

As the franchisers handle certain parts of the business such as product research and development by themselves, the best thing is to negotiate the terms with the suppliers and benefit from the purchasing discounts.

As the franchisers want to succeed, boosting the profits, they offer franchisees with an ongoing and training support for the franchise business. This makes the investors capitalize on their brand name and customer ship instead of starting from the scratch. Also, the franchisers are able to expand their business which helps in both the productivity and efficiency when a new franchise is opened.

Helps in Avoiding the Previous Issues

When deciding to invest in a franchise, you are able to benefit from the different mistakes and successes which others may have experienced in the past. You would be provided with valuable information from the corporate office regarding the increased profits and the error in judgment, compiled from a lot of years from different locations.

Why Investors Succeed with Franchises?

When the entrepreneurs purchase a franchise, their success is ensured given that they stay persistent in their business practices. The operations that require consistency include:

• Every day Operations
• Customer Service
• Advertising Campaigns
• Using a Logo

What you need to know as an investor?

The relationship between both the franchisee and franchiser is interdependent and complicated, as both the parties strive to keep the communication lines open and observe the sound management practices. These are really important for the maintenance of common goals, team spirit, and the same objectives.

Founded in 1965, the subway chain of restaurants has grown to nearly 43,000 franchises covering 108 countries of the world. Considering these facts, you would surely want to own a Subway Franchise to kick off your career as a business entrepreneur. However, similar to any franchise business, you need to weigh the pros and cons of every franchise before finalizing your investment decision.

Offering a Tremendous Administrative Support

Subway offers great administrative assistance to their franchise owners in the following fields:

• Ongoing product developments
• Extensive Marketing
• Training

Buying Supply and Product Power

The franchise purchases its supplies through a collective, established by the company for leveraging the franchising amount to offer better pricing.    With the help of such administrative benefits, kicking off the Subway restaurant is quite easy.

Business Still Depends on the Locations

Businesses that rely on retail sales depend on the location. The biggest complaint coming against the subway franchise over the recent years was putting it in confined geographical areas. With a company having 43,000 locations in 100 countries, it becomes overlapping for a lot of franchise owners.

This is why, you need to discuss the locations with the local subway franchise representatives, to know about their plans for populating the geographic regions with Subway locations, as this will make you understand about the business growth and sales in your area.

Has a Strong Brand Reputation and Marketing Campaign

Being a franchise company, Subway offers marketing presence which is stronger than the other sandwich shop franchise companies. Subway offers the following marketing features:

• On buying the subway franchise, you get an incredibly strong brand name which many businesses spend millions of dollars and many years to build
• Reputable marketing slogans including characters to appeal to a broad audience
• Brand Name Recognition Giving You Advantage over the Competition
• Continuous marketing program which expands and enhances the brand

Return on Invest

Well, with any franchise, this depends on how well you run and manage it. However, as an estimate, subway franchises on an average offer 20% return to the owner. In case, you select a great store location, you can see yourself earning revenue of $500,000 per year, leaving you with $100,000 profit on your investment.

From combining all the above information, the Subway franchise has gone a lot of pros than cons, which means that by investing in it, you can surely have a successful business career.