Posted by Kimberly Ellis in Franchise
Susan, a bright, energetic and make believe person, has decided to become a business owner by buying a franchise. She understands that there are many steps to the process and asks me how long it will take before she will be able to open the doors to her business. Figuring she wouldn’t be satisfied if I told her that it could take anywhere from several months to a year or longer, more or less, I came up with the following timeline:
Step 1: Finding the right franchise
Susan could be out shopping and see a for sale sign in the window of a storefront franchise. If she likes the business, can meet the seller’s price, is approved by the franchisor, and gets in on a franchisee training program right away, Susan could be running her new business in a short period of time.
However, a more likely scenario is that she will spend weeks or even months doing research on a variety of franchise businesses before selecting one for purchase. Once she finds a business to investigate, Susan will have to go through a Discovery Day to meet with the franchisor in person, learn more about the business, have financing arranged, and be approved as a franchisee.
There are a lot of variables here but much depends on a person’s motivation –
how anxious they are to start a new career. Another variable would be how the search is conducted. If Susan uses a franchise broker to help her narrow down her search, the process usually takes about six weeks. If she decides to do research all on her own, it may take months or even as long year before she is confident she has found the right business.
Average research time: Six weeks to six months
Step 2: Finding your location
The actual territory of your business will be part of your contractual agreement with the franchisor and within that territory you will probably need a physical location. The location could be in a mall or strip-mall, a warehouse in an industrial park, or a stand-alone building. Some exceptions would be home-based businesses that you could run from a home office or cart-based franchises that you would take to events like parades, carnivals, fairs, etc.
Most franchisors offer at least some help with site selection to find the most advantageous location for your business. Some even help with the lease negotiations. Specifics for build-out and furnishings are usually covered in your agreement and franchisors use their bulk purchasing power to get you reduced prices these items.
Depending on how difficult it is to find a location and the amount of work needed to get your location ready for business, this process could be lengthy. I’d tell Susan to be both prepared and patient.
Average time for location search and build-out: Six to eighteen months
Step 3: Financing
I spoke briefly about financing but that was assuming that my friend Susan had cash in the bank ready to spend on a franchise business. The cost for opening a business covers three areas: the initial fee paid to the franchisor, the cost of preparing the business for opening, and finally the cost of running the business for that period of time until it is profitable. That includes paying your bills and your employees and also the money you need to live on.
Fortunately a prospective franchisee doesn’t need to have all that money in her pocket. Some of it can be borrowed from a bank, usually using equity in a home. Another option is taking the money from your retirement savings plan.
Often the franchisor will help you find a franchising option by connecting you with some companies that do these types of loans. However, the sooner you can get financing, the sooner you will move ahead with your new business so don’t put this item off until the last minute.
Average time to secure financing: One to three months
Step 4: Training
Once Susan has selected her business, she will be excited and anxious to start training. Training programs can vary quite a bit from company to company. Some franchisors will do training by email and phone for a period of weeks and then bring in the new franchisees for some classroom work and hands-on training at headquarters. Other businesses need only to provide several days of classroom training.
Since Susan’s training should cover all aspects of running her new business, from operations to marketing to customer service, a training program of several weeks or more is typical. Many franchisors will offer a number of continuing training opportunities as well, and because I believe the more you know the better, I’d be sure to encourage Susan to take advantage of all the training available.
The good news for Susan, who is anxious to get started, is that a majority of the best franchisors have new franchisee training classes scheduled at least monthly so her wait to start training won’t be long. The franchisor will be just as anxious to get the new business open as the franchisee, so they will have the training process thoroughly mapped out.
The length of time for training will depend of the type of business. If the franchise provides a service, training to learn the service may require a more lengthy training time than would be required for a simple retail outlet. In a business with a more involved retail operation, a new franchisee may need to work in an existing location for a period of time to thoroughly learn the business.
Average time for franchisee training: Two weeks to two months
Step 5: Other Issues
Depending on the type of franchise you buy, you may also need to deal with zoning or permit issues, hiring and training employees, and stocking your store. If these will apply to your business, add more time to your estimate.
I’d caution my friend Susan to use these figures as estimates only. Each situation will be unique. The most important thing I’d tell her is to be sure she has adequate financing to cover whatever delays may occur because being under-financed is considered the number one reason most franchisees fail.
Kim Ellis is the President of Bison.com, a leading online resource for franchise and business opportunities. She has been quoted as an industry expert in USA Today, Wall Street Journal and a variety of local and regional publications regarding trends in business and franchising. Kim combines her entrepreneurial spirit with a diverse background in marketing and operation to help others succeed in franchising.