Finding Your Franchise
Sometimes a firm wants to expand into new territories and markets, but it may not be able to do this without specific knowledge or capital. Franchising offers entrepreneurs a way to increase their understanding of the local market by helping locals in starting a business and join an already successful corporate model.
Like a new car or home, starting a franchise should not be taken lightly as a decision for where to invest. If you have no idea where to start, consider the tree service franchise world, an industry that’s gaining power in the market for its benefits. All you need to know on how to start a tree service franchise will be found in this essential guide.
Once you decide on buying or starting a tree franchise, gathering all the info you can get becomes an easier decision to make. You need to dig into the financial performance of the franchise’s locations already operating, your finances, how much can you expect to get back on your investment, the benefits the franchise offers—support, exclusive territory, discounts, help with training— and much more.
The best franchise review sites offer insight into the satisfaction of each franchisee, the performance, and the requirements and cost as well.
Finding out the happiness and engagement of your potential fellow franchisees, employees, candidates, and customers is also essential. You can start looking for the best tree service franchise today while paying attention to full transparency and all kinds of details needed to trust a franchisor and its franchise fully. To start a franchise on the right foot, pay extra attention to these next tips:
Do Your Research
Even before you start picking apart handfuls of franchise opportunities and their locations, you need to research the industry you’re interested in. Research how many companies and businesses are part of it, its worth, growth projections, the required investment, initial investment cost, and the skills to enter it.
For example, the tree service industry, which does not take much to be part of, will soon grow to $20 billion. Still, it requires investment in equipment, insurance for workers, and customer service, as well as higher interest from people in getting to know urban development and housing.
Part of what you can do when doing your research is:
Dig All The Dirt You Can
Digging for relevant information, bad reviews, and so on, will give you the confidence to make the right decision. Surf the web until you’re satisfied with the results, and if you found negative things about a franchise, then feel lucky about knowing and keep doing your research. You’ll find a trustworthy option if you do your due diligence.
Talk To Other Franchisees
Most importantly, get the word straight from the horse’s mouth, or in this case, from the other franchisees. The right franchise will provide you with the Franchise Disclosure Document (FDD) with information about its other locations, but also with the contact information, so take advantage of that and talk to other franchisees. This document will help you contact them and request objective brand information.
Personal preferences
There will be some franchise salespersons who will talk down on you, and you have to stand up and say that you are a serious investor. Once you’ve decided against moving forward with the process of starting a franchise, then you must have your preferences and interests well placed, so it doesn’t turn out confusing for you. Have a general idea of what your business plan might look like, think about what you like and what you can do to make the area of expertise of your choice, a better place. Asking for references to people you know might also help you see things clearly about some franchise opportunities, so don’t hesitate to make all the phone calls and Google searches you find necessary.
Franchise costs
In America, franchising is another way of investing. It is not a passive investment, unlike stocks, and you can work hard to achieve better results than merely waiting for the market to turn the right way.
Reports from the International Franchise Union indicate that 4% of all small firms in the USA are franchises with revenue exceeding $2.1 trillion and employing up to 18 million Americans. In other words, franchising is a vital component of the US economy.
For starting a franchise, you will need an average of $250,00, even if you may have a franchise for tree services between $100,000 and $200,000, whereas franchising recipients pay average royalty fees of between 3% to 6% of gross monthly sales.
Internal rules and regulations
Getting to know the internal rules and regulations can be a bit overwhelming. Still, if you keep your eyes on the bigger picture, then all the details can appear as something understandable, and if you start with the basics, then what comes next can’t be as bad. Look out for these next terms and concepts when introducing yourself to the franchise environment.
1. Payment of fees
For the right to operate the business, franchisees pay regular prices to the franchisor. Franchise costs can be a flat amount, or a sales revenue percentage fee.
2. Operations
A big part of the franchising business model is the requirement to follow a particular set of operational directions in running the business.
3. Franchisor approved supplier list
Franchisors may allow franchisees to buy equipment from the list of “approved” suppliers that sell goods and products to meet company-wide requirements. Such approved supplier lists are generally included in the operations manual. If a franchisee buys from a supplier that’s not on the list, then the franchisor might issue a breach notice and penalize the franchisee or even null the contract.
4. Employment obligations
Franchisees hiring workers must comply with regulations on the workplace. Franchisor’s focus is on this.
5. Premises license and territory provisions
The franchise agreement also limits the operation of franchisors in a particular location or geographical area. For mobile franchises that routinely travel to service customers, this is especially important. Franchisees who accept jobs and represent candidates abroad will easily face notices of a breach.
6. Renewal provisions and transfer provisions
Typically, when the franchise agreement expires, franchisees must comply with the specific instructions of the franchisor. If the franchisee wishes to renew for a further period, it must fix any deficiencies and pay a maintenance fee. Franchisors will often be able to refuse to replace if the franchisee has not followed the provisions of the franchise agreement or if it wasn’t deemed like a good investment from the point of view of the franchisor.
7. Consequences of non-compliance
What happens when a franchisee fails to comply with one or more of the points above? Falling short of any rule of the franchise will generally give the franchisor a right to issue a franchisee with a breach notice. A breach notice is a formal notice to the franchisee that it has failed to comply with a requirement of the franchise agreement.
Franchise Disclosure Statement/UFOC
The Franchise Disclosure Agreement (FDD) is a document that all franchisors must have and provide to prospective franchisees that want to make an informed decision about their new investment. It’s handed over to the potential franchisees at least 14 days before signing any franchise agreement (which also has to be handed over seven days before signing it). It has to be understandable, written in plain English, and with the terms and rights laid out.
From the franchise fees, franchise profits, territory, and even the FPRs of existing franchise sites, everything must be in order.
The FDD also provides telephone names and contact information for all franchisees, which allows you to call and ask for accurate brand information.
Go Over Your Contract With a Legal Team
This should be a natural choice before being involved in a new business or any type of business. Diving into the unknown is something we should never do alone, so if you’re new in the franchisee/franchise/ and franchisor world, then the company of a legal team that can guide you through it all will be ideal. But if you are wondering, why exactly do you need to hire and go over your contract with a legal team, here is why:
1. They know the priorities
Prospective franchise holders have to get the Franchise Disclosure Document (FDD) before they purchase the franchise that they want. A step that’s one of the top priorities, and when it comes to other steps to take, a legal team will undoubtedly know what the first things to address in these situations are.
2. They can advise you on choosing your business entity
A professional franchise lawyer may offer useful ideas on how to create a new business or franchise business. Is your company considered to be a limited liability company (LLC)? A Subchapter S Corporation? A C-Corporation? When you hire a legal team, they can solve all these questions.
3. They can help you if things go wrong
Nobody wants to fail in franchising. But what happens if unforeseen circumstances cause you to shut down the business?
Perhaps, the franchise you selected wasn’t a good fit for what you had in mind, or you didn’t make money fast enough. Also, maybe the location you chose wasn’t the right one; all these possible scenarios can happen, and only with a legal team behind you is that you will be able to turn the page and figuring out a way of fixing any issues.
4. The franchise development director will try to convince you otherwise
If a franchise development manager ever asks you to not waste your money by hiring a franchise lawyer, only because the franchise agreement does not make it negotiable, don’t pay attention to it. Why? Because the real reason you hear such comments is due to the director’s convenience and their franchise growth, as they require you to sign the contract as soon as possible.
Finance Your New Franchise
Franchise ownership is at first, all about getting the financing right, and there may be some obstacles you will have to overcome to have a bright franchise future. If you still have no idea how to start a franchise, then keep reading, as here are some of the options you have at your disposal when it comes to starting a new franchise and financing it.
Net Worth & Working Capital Requirements
For your tree service franchise, you’ll need a minimum amount of capital to start up or to take you seriously. You can be asked to have a minimum of $25,000 to $500,000 or more, although the average for a tree service franchise is more in the range of $100,000 to $200,000 required to start a franchise.
Choose The Best Funding For You
A franchise can be the ideal opportunity for anyone interested in becoming an entrepreneur. Experiencing both the versatility and freedom of owning a small business combined with the resources and services of a large company is something that will bring you so many benefits.
Nonetheless, a substantial expenditure of capital is required to create a franchise, which often includes a high franchise fee and ongoing royalties and advertising costs. This form of cash is not available to everyone. Therefore, you might find it challenging to navigate among the various options you may encounter in case you need a business loan to fund your franchise investment. However, if you choose the right funding, all that comes your way during the process of buying a franchise and starting a franchise will turn out more than fine.
ROBS (Rollover for Business Startups)
A business startup rollover (ROBS) allows the company to invest retirement funds from a 401(k) or an individual retirement account (IRA without paying early retirement penalties or taxes). A ROBS is not a corporate loan or a401(k) loan, and no principal or interest payments are due. There is no debt.
Studies showed that ROBS owners also report higher success rates than those dependent on traditional corporate financing. A ROBS can be complicated, however, and it is necessary to consult a professional to find out whether a ROBS would work for your company. You can get a free no-community consultation from one of the leading ROBS providers in the industry if you have $50,000 or more in an IRA (An individual retirement account) or401(k).
SBA Loan
One of the popular options for aspiring franchisees is the SBA loan. In essence, SBA credit is loans backed by the US Small Business Administration and funded by its intermediary loan partners.
SBA loans are very similar to traditional banking, as SBA decreases borrowers’ liability by ensuring that the loan is partly covered; however, lenders are allowed to provide more low-interest rates loans and longer terms of repayment.
The SBA loan is one of the best options to fund a franchise, and you can apply if you can qualify thanks to a good credit score and financial history. Although you need to note that the requirements for qualifications can be strict, and the request process is a long one. It’s worth carefully considering your chances of being approved for an SBA loan before you spend significant time pursuing a financing option that may be unreachable for the current stage of your franchise.
Regular Bank Loan
A conventional term loan from a bank is a convenient way to fund your franchise. A term loan is what most people imagine when they think of a loan financing process. In this scheme, you are given a lump sum of cash, which you have to repay with interests over a set period.
Your lender will want to check your business plan and personal credit history when seeking a commercial bank loan to buy a franchise. These records are used by the lender to determine the loan interest. In essence, the bank is in charge of deciding whether you can legally approve your request to repay the loan and, thus, the probability of its money being returned.
Get The Loan From The Franchise Itself
If you need capital to buy a franchise, you must have a long chat with your prospective franchisor regarding your financing options.
Most businesses with franchise business models provide custom funding options designed exclusively for franchisees, either in collaborations with different lenders or by directly capitalizing on the venture. Custom funding options is one of the most common ways of financing a franchise.
One advantage of the franchisor finance is that it is a one-stop-shop for all you need. Many of these schemes not only provide money for franchise fees but also for buying equipment and other services that the company needs to start up.
Also, you are likely not to have to look much further for funding if you work with a franchising agent who offers its financing program. Who knows the company better than the franchisor, after all? They know the risks, the ins, and outs of the company, better than any other borrower could ever take.
Establish Yourself
Evaluate your situation and how things are proceeding before you decide to invest, as establishing yourself should be one of the two priorities once you’ve done all the paperwork and paid the right financing. What comes next should be more natural than when you were just starting your franchise journey.
In this process, you might learn some lessons that will take you where you want to be as a franchisee, and when you find your place in the business, then it will be the time of thinking ahead. Establishing yourself will require you to make intelligent decisions for your business—business plan or business model— such as hiring the right managers and employees once you are prepared to grow. It may take some time for you to trust your decisions, but do not allow any mistakes to stop you from growing in the market.
Buying a Franchise Vs. Leasing a Locale
Owning your small business franchise has advantages–such as a successfully developed business model, available resources, and stability. However, every small business owner still faces many stresses, even a franchisor and franchisee. One of those is the decision to buy or lease a location for the franchise. It doesn’t have to be stressful, so here are a few tips.
The 504 loan from the Small Business Authority motivates franchisees to buy space, which has numerous advantages over leasing.
- Leasing has lower upfront costs, but over time will cost much more
- Monthly payments are often very close for rental and ownership
- With ownership, you profit from the value of the building; your landlord takes advantage of the leasing
- You can rent any unused space by owning your building, which reduces your occupancy expenses.
- The wealth that you build from your property will make your pension a secure one.
- You have tax benefits for owning your building
One of the essential advantages of having your locale is to ensure that your company has a safe place to be and that the cost won’t increase or fluctuate over time.
Train Your Employees
While initial training of the management staff at the franchisee’s headquarters or other training facilities can often be given by the franchisor, initial and ongoing training is generally provided directly by local or long-distance learning methods for the franchisor’s staff. The training provided by franchisors has many benefits, as franchisees meet many competing demands on time, and many may not be able to offer their workers high-quality one-on-one training.
The franchisor will provide business training and support for field workers who provide the training programs. You won’t have to worry about training employees yourself, as it is included in the contract most of the time.
Generate Some Buzz
You’re going to tank if nobody cares about you. Marketing and buzz generation are some of the toughest aspects of managing a business. To get you to the top, you need loyal customers. Generating buzz about your franchise is essential to put your business on the map.
Buzz or word-of-mouth marketing is best described as “people talking about you.” Has a friend recently recommended a restaurant or a hairdresser or told you to watch a crazy YouTube video? Has a business connection suggested a new online service that will help you with accounting?
But what is “buzz” exactly?
The best description is “who is speaking about you,” and it is also called word of mouth marketing. It’s a recommendation from a family or friend; someone you trust. The same happens to a business partnership when it reaches a high level of popularity. You need to get your franchise in everyone’s mouth, and luckily for you, the right advertising and marketing might be included once you buy a franchise, or at least that’s the case in the most reliable tree service franchise companies. Buzz is when people are talking about businesses or companies.
The magic of buzz can take place organically and lasts forever. Your work is done when people start speaking about you.
Are you interested in a Tree Service Franchise? Go to the right place today and forge a new future in this business!
