How Does a Retail Franchise Model Work?

According to Franchise Guardian, a new franchise opens “approximately every 8 minutes, every day” and franchises account for approximately 1 out of every 12 businesses throughout the country. Clearly, franchising continues to be a popular approach to starting a profitable new business. That being said, if you’re interested in franchising, there are several different types of franchises you might choose from—each with its own nuanced potential advantages. 

In this blog, we’re going to take a look at retail franchises, answering some key questions along the way, such as:

• What is the franchise model, as it relates to retail?
• How do you go about opening—and managing—a successful retail franchise?
• Where can you find the top retail franchises to invest in?

What Is the Retail Franchise Model?

Similar to other franchise industry models, the retail franchise model centers around a franchisee opening a business that shares its name, branding, trademark, and other characteristics with a larger brand. In other words, when you purchase a franchise, you’re essentially paying for the right to use an established name, brand, and other assets while operating your own store. 

There are countless benefits of the franchise model in retail, most notably the ability to “be your own boss” without having to build an entire brand from scratch. And you’re almost certainly familiar with many—if not all—of today’s biggest retail franchises, a list which includes companies like:

• 7-Eleven | The home of the Slurpee, 70,000 7-Eleven stores span 19 countries.
• The UPS Store | There are over 5,000 UPS Stores throughout the world, enabling businesses to more efficiently manage their shipping costs and logistics.
• Anytime Fitness | Over 4,500 locations across 30 countries make Anytime Fitness a convenient and popular choice for fitness novices, buffs, and everyone in-between.
• Great Clips | Great Clips specializes in providing customers with high quality—yet affordable—haircuts, across over 4,000 locations in North America alone.

Of course, it’s worth noting that a company doesn’t need to be a household name to be a worthwhile franchise investment—not by any means! At FranchiseGator.com, you can browse big-name retail franchises as well as smaller, niche-driven companies. There are plenty of gems waiting to be discovered in our Franchises Under $50k category.

What Is the Difference between a Retail Chain and a Retail Franchise?

While people often use terms like “chain” and “franchise” interchangeably, they are not exactly the same thing. The difference is rather simple, though. 

• Within a retail chain, the parent company owns everything—the brand, the trademark, the assets, and each physical location. 
• When you open a retail franchise, by contrast, the parent company (franchisor) still owns the brand, trademark, and assets—but the franchisee owns and operates their own location.

How to Open a Retail Franchise (In 6 Steps)

Now, you may be wondering how complicated retail franchising might be. You may even feel a little bit intimidated. Fortunately, franchising has been around for decades and follows a fairly repeatable, routine process. Here are the 6 most important steps you’ll need to take:

1. Researching | As is true with any significant investment, the more research you’re willing to do before pulling the trigger on a given franchise, the better-positioned you’ll be to make sound business decisions throughout the process. Before you even start thinking about specific franchises you might be interested in, you should consider what sort of opportunities will best fit your skill set, interests, and lifestyle. If you’re not sure which direction to look, you can start with our Top 100 Franchises list.

2. Evaluating the Market | If you decide that you’re ready to jump into retail franchising, the next step is to explore the market. On a basic level, this means familiarizing yourself with the latest trends in the industry. From there, you’ll want to think critically about where the best opportunities might lie for a successful and in-demand franchise. When you browse available retail franchises on FranchiseGator.com, you can quickly gain insights into individual franchises’ history, investment cost, and other key factors.

3. Forming an LLC | The next step is a logistical one: forming an LLC or corporation. This is a relatively straightforward process that serves to separate your personal and business assets from each other, which also helps from a liability perspective. You can learn more about this process and its importance for franchisees in this ZenBusiness article.

4. Starting Your Application | Before you begin your franchise application, you’ll want to make sure you have all your proverbial ducks in a row, as the franchisor will want to know all about your:
   1. Financial picture, including your ability to meet the required investment level
   2. Background, potentially including your education level and employment history
   3. Proposed location, and reasons for choosing it
   4. Motivation, goals, and general reasons for getting into retail franchising
   5. Specific concerns or questions, if you have any

5. Getting Financed | Just because you don’t have a literal fortune sitting around waiting for the right investment opportunity, that doesn’t mean you can’t succeed within the retail franchise industry. And fortunately, there are plenty of ways to secure potential funding for your franchise. For example, the U.S. Small Business Administration (SBA) outlines three main funding methods: self-funding, seeking funds from investors, and procuring small business loans. You can learn more about these (and additional) franchise funding sources in this article. 

6. Reviewing—and Signing—a Franchise Agreement | Finally! It’s time to seal the deal. While this step seems fairly straightforward in that both parties must read and agree to a set of specific terms, it shouldn’t be rushed or treated as an afterthought. In reality, this is a crucial and foundational step. A franchise agreement is a detailed, legally-binding contract between the franchisee and franchisor, so having a trusted advisor or legal representative review it is certainly recommended.

Where Can I Find Retail Franchises for Sale?

That’s an easy one—FranchiseGator.com! You can view our full line-up of available retail franchises, or see what else is out there, across various industries. Here’s a #ProTip: You can also use the drop-down menus at the top of the page to combine multiple search criteria (to find franchises within a given industry and investment level, for example). See a franchise that sounds interesting? Great, just click the Request Free Info button to learn more!