How Does Franchising Work? Understanding The Basics

How does franchising work? If you’re considering starting a business, a franchise gives you name recognition and ongoing support. Check out Budget Blinds’ guide to understand the basics of franchising.

Basics of Franchising

To answer, how does franchising work? Let's start with the basics. For an upfront fee, a franchisee gets to operate a business using the name of an established brand. Franchisees benefit from the expertise, resources, and reputation of a proven brand. The franchisor provides training, operational guidance, marketing support, and access to proprietary products or services, ensuring consistency across all franchise locations. In addition to ongoing royalty payments based on sales or revenue, franchising enables franchisors to expand their reach with reduced risk.

Many people mistakenly associate franchising with fast food. However, more than 4,000 franchise brands in the U.S. cover 230 industries. Choosing a franchise can put you on the right track as you start your entrepreneurial journey. It can be less risky than starting a business from scratch because you’ll have the support and guidance from the franchisor and insights from the franchise system to help you be successful.

How does franchising work? The proof is in the numbers:

• There are more than 821,000 franchises in the U.S., generating $894 billion in revenue
• An estimated 10% of all U.S. Small Business Association loans go to franchises
• At least 68% of franchises open for two years are profitable
• More than 8 out of 10 franchisees planned to grow their current location, and 24% planned to add new locations in 2024

Types of Franchises

Choosing the right franchise requires outlining your goals and aspirations. Do you want to own a retail store or be an owner-operator? Do you want to set your schedule or work a 9-to-5 schedule? It’s important to understand how much money you’re willing to invest and the market demand for your franchise. Understanding the different types of franchises can help narrow down your options.

• Product franchise: A product franchise distributes a franchisor’s goods, such as tools, sodas, and tires.
• Job franchise: This low-cost franchise model encourages franchisees to be owner-operators. It’s a good choice for someone who wants to be an entrepreneur but doesn’t want to manage a team. Job franchisees are usually freed to set their own schedule and work from a home office.
• Business format franchise: This is the most common type of franchise — Budget Blinds is a business format franchise. The franchisor provides a complete system for operating the business. Franchisees receive a detailed guide outlining daily operations, marketing guidance, training, and ongoing support.
• Investment franchise: An investment franchise is an option for high-net-worth individuals who want to diversify their portfolio. It typically a large operation, such as a hotel or larger restaurant. Most investment franchisees hire a management team to handle the business’s day-to-day operations.

Demystifying The Franchise Process

Before you finalize a franchise agreement, you’ll need to follow a series of steps to make a decision that’s right for you.

1. Investigate specific franchises: Once you’ve outlined your goals, financial capacity, and type of franchise, you can start diving into your franchise search. Investigate specific franchises by reviewing the franchise disclosure document (FDD). The FDD provides detailed information about the franchisor, financial requirements, and franchisee obligations. Talk to current franchisees to better understand what it takes to operate the franchise and gain insights into any operational challenges you may face.
2. Create a business plan: Your business plan should include your business’s costs and potential revenue, as well as the type of financing you plan to obtain. It should also provide details on your operational plan. It’s a good idea to have experts, such as a lawyer and financial advisor, analyze the details of your plan for an added layer of security.
3. Attend Discovery Day: Discovery Day provides franchisees with an in-depth look at the franchise. It allows you to meet with the leadership and support team and serves as a mutual evaluation opportunity for both parties before finalizing a franchise agreement. You’ll get to ask detailed questions and spend time in the field to gain more insights about the business. Budget Blinds hosts a virtual “Meet the Team Day” with our home office to help you learn more about marketing, technology, training, support, and more — this is your opportunity to interview us!
4. Sign the franchise agreement: Once you iron out your territory details, sign the franchise deal.
5. Attend training: Every franchisee attends training to learn the ins and outs of the business. Budget Blinds offers a combination of in-person, virtual, and on-the-job training to ensure its franchisees have the necessary tools and skills to serve customers.
6. Grand opening: Once you complete your training, it’s time to get started. Plan a launch event to attract customers and generate buzz.
7. Get to work: Once you start serving customers, you’ll continue to receive support and guidance from the franchisor. Budget Blinds’ franchisees have the support of a regional operations manager and receive assistance managing and tracking financials, including creating a 12-month plan.

Budget Blinds: A Franchise Success Story

Budget Blind’s is the No. 1 window coverings franchise. Established in 1992, it has nearly 1,500 franchise territories that serve over 10,000 cities. Today, Budget Blinds is part of Home Franchise Concepts, a leader in the home services sector with ten brands, including Kitchen Tune-Up, The Tailored Closet, Two Maids, and more.

Inquire now to learn more about partnering with Budget Blinds to launch a franchise in your community.