Information on Requirements to Franchise

Starting a business isn’t for the faint of heart. While operating a franchise offers less risk than other types of business, there are still some requirements to start a franchise that you’ll need to consider. This guide will show you how to start a franchise, with an emphasis on navigating the basic requirements of operating this type of business.


First, it’s important to recognize that this is a big commitment. Owning a franchise offers the support of the franchising company, but don’t minimize this undertaking. Operating a franchise still takes time, money, and sustained attention to be successful.

In fact, because you’ll be signing a franchising agreement, you’ll be contractually obligated to operate the franchise for a specified duration of time. This means that in many cases, you won’t be able to get out of your responsibilities without incurring penalties. Count the costs before you invest in a franchise.

Startup Funding

Money is one of the most basic requirements to start a franchise. You’ll need money to cover a range of costs, including:

  • Commercial real estate
  • Equipment and supplies
  • The franchising fee
  • Business insurance
  • Licenses and permits

Thankfully, the costs of starting a franchise are relatively standard, which makes it easier to go through the loan process. The U.S. Small Business Administration, for example, offers business loans specifically aimed at franchise operators.

A Business Plan

A well-written business plan can be a valuable guide to learn how to start a franchise. When you apply for funding, your lender will likely ask to see your business plan.

A typical business plan will include the following:

  • An executive summary (highlights key points)
  • Your business name and description
  • Market research
  • Management structure
  • Marketing strategy
  • Financial projections
  • Funding request

One of the benefits of operating a franchise is that your franchisor can assist you in compiling this data. For example, most nationwide chains already have their own marketing department, which can help with market research and explaining your marketing strategy.

The Right Equipment

Franchises, of course, cover a range of industries. While we might associate franchises with the restaurant industry, they also include gyms, tax preparation services, retail stores, vending machine companies, and more.
This variability means that your equipment needs will be as diverse as your business. You may need things like:

  • Kitchen equipment
  • Tables, chairs, etc.
  • Gym equipment
  • Office furniture
  • Point-of-sale (POS) systems

In many cases, the franchisor can help you determine what to get, and because these items are regularly purchased for other franchisees, you may be able to get the items you need at a discount.

The Right Licenses and Permits

Depending on your industry and specific location, you may need specific business licenses and permits.

For example, if you are a restaurant owner and you plan to serve alcohol, you’ll need to register with the federal government to do so. You’ll also need to prominently display these licenses and permits in your establishment to avoid fines and other penalties.

Again, your parent company understands the requirements to start a franchise and may have gone through an identical process with businesses operating in nearby territories. They can guide you through every step of the process, eliminating the confusion of adhering to these federal and local regulations.

A Solid Accounting Plan

How do you intend to keep track of your income and expenses? This consideration isn’t just important when you’re planning for taxes. Financial data can help you monitor the health of your business and hone your strategy moving forward.

Your franchisor may have specific requirements regarding the way you handle your books. These requirements can include the specific accounting method you use (cash basis vs. accrual, for example), as well as whether you need to handle your books in-house or outsource to an approved accounting firm.

Business Insurance

The majority of franchisees will need some business insurance. If you have employees, you’re federally required to carry business insurance. This insurance can protect your establishment from accidents, vandalism, theft, and lawsuits.

Again, your franchisor understands how to start a franchise in your area and can provide direct guidance on the type of insurance you need and where to obtain your policy.

Where Can I Find a Franchise Near Me?

Starting a franchise can be exciting, as long as you’re prepared. Why not start your research today? At Franchise Opportunities, you can use the online franchise locator tool to find franchise opportunities in your area. You can also contact our team with additional questions so that we can guide you on every step of your journey.

Posted on Tuesday June 21, 2022 by Staff to Franchise Business Resources