Most franchisors have a minimum net worth and liquid capital requirement for their franchisees.

Yes, the franchisor will want to populate their system with great people who will present their brand in the most positive light. They typically have set standards and know which types of franchisees will thrive.

Yes, but make sure to be diligent in getting all the details including why they are selling, the key employees, the current financials, the current lease and equipment.

Maybe! This is typically the testing period, and the company is learning how the concept works in a variety of locations. If you are a risk taker, feel free to jump in. Otherwise wait until the company has completed this initial learning curve.

Yes, calling other existing franchisees is the very best way to learn about a franchise system. If the company has happy and successful franchisees, that’s a very good sign that it’s a well-run operation who will be around for the long-term.

Working capital or operating capital usually include a lease, the cost of employees and equipment, and any supplies or utilities. If you want to consider your income as operating expense, that gets included too.

All franchise systems are different. Most franchisors display a range of incomes in their disclosure document including upfront costs and earnings claims.

There are several options for financing including bank loans, loans from friends or family, taking on a business partners, borrow money from your 401k or home equity.

Some franchisors have franchisees contribute to the mandatory marketing fund, either by a fixed amount or a percentage of the gross sales of the unit. This allow the franchisor to pool the funds and hire top marketing specialists to create a campaign that will be benefit the enter system.

No, the franchisor provides a model and business plan for you to follow, and you have a peer group of other franchisees to go to for advice and the corporate office is always there to support you as well.

It’s fine! If you are a ready for a career change, franchisors take pride in their training programs and will provide everything you need to know about the product, service, brand, marketing, employee training, equipment, supplies and inventory as well as bookkeeping and financial reporting requirements.

Successful home-based businesses require the owner to be very organized and motivated and usually wear many hats. Working out of your home can be a cost benefit and provide freedom but sometimes there are too many distractions, and it can be isolating.

Franchise Owner Option #1: The Owner-Operator

Most people think of franchise ownership as an owner-operator in place of a job. This option describes someone who not only owns the franchise but also works in it full-time. They personally oversee the business setup and launch. They supervise employees, serve customers, and manage vendors on a day-to-day basis. The owner-operator works on site like a corporate employee would in an office or a retail environment. Successful owner-operators need to have solid business, operational, customer service, and leadership skills. This option may be a particularly good choice for franchise owners who are seeking self-employment, not necessarily an investor path or early retirement. It may also make franchising more affordable since you don’t have to hire a full-time manager for your business and operate it yourself. It may be a demanding job, especially at first. You need to have plenty of energy and be willing to work long hours at the outset.

Franchise Owner #2: The Investor or Executive Owner

This type of franchise owner sets a business strategy and oversees operations but does not work full-time in the business.  The critical skill to possess is the ability to manage a manager.  Depending on the person’s skill, aptitude, and leadership style, they may check in on the business weekly or just a few times per year. This type of franchise owner typically has limited to no contact with customers, and they hire people to manage day-to-day operations, accounting, and marketing. However, the best Investor or Executive owners are always aware of what their delegates are doing and stay in regular contact with them.

Investor or Executive ownership is a good choice for people who want to own multiple franchises, are interested in semi-retirement, or want to build a franchise while still working. Being an Investor or Executive franchise owner requires similar skills to running a company or a division within a corporation. This option is not for people who wish or need to micromanage projects or people. Keep in mind that the need to hire a team typically makes Investor or Executive ownership more expensive than being an owner-operator. But it frees you up to manage multiple franchise territories or locations, so you may achieve economies of scale and potentially build greater wealth overall.

Franchise Owner #3: The Partner Option

A silent partner is a franchise owner who contributes significant funding to the business but is not involved in strategy or operations. Instead, they partner with at least one other individual who can take on those responsibilities. A silent partner usually contributes more money than their fellow owner(s) in return for being exempt from strategic and operational duties.

For most franchise owners, being involved in the business at some level is part of the appeal of franchising. But if you are attracted to franchising simply because of its wealth-building potential and have a large sum to invest in, a silent partnership may be a good option for you. Just keep two things in mind: you must be comfortable having little to no say in business decisions, and you must have strategic/operational partners you can trust.

Under-financing is often the reason for failure. Typically, a franchisee needs a minimum of $20,000 in cash and the ability to come up with another $100K – from loans or other sources.

Turnkey refers to a franchise package so complete that everything you need to start the franchise will be done for you include the location, lease, build-out, start-up inventory and staff training. Take the time to understand all facets of the process and the associated costs because there are typically additional expenses for this type of package.

Yes, but your risks are limited because you are using a system that has already been proven. You don’t have the guarantee of success but you have the potential to be successful.