Have you always wanted to own a “brand name” chain, or conversely, have your own name on multiple coffee houses that sell your famous scones? The answer might lie in franchising opportunities.

It’s certainly a popular option, as franchises continue to grow year after year in the United States and across North America. Whether you hope to buy into a system as a franchisee, or build your own name and service into a new top Franchise, there are a number of additional aspects that will be key to your success.

Side 1 of franchising: Buying an existing franchise

Meet Sam. He’s always wanted to be his own boss and sell his famous (to his friends at least!) smoothies. But, even though he believes he could successfully start a small Business, he is hesitant to open up his own business as “Sam’s Smoothie Shop”—he sees that there is a great deal of risk involved in business opportunities related to creating a demand for something that (if he was being honest) is really only famous among his close circle.

And, yet, he can’t stop thinking about how rewarding it would be to get to know his neighbors and provide healthy drinks all day long. What if he became a franchise owner by opening an outlet of a smoothie shop? He could find one that already has brand recognition and positive associations, which would remove a large hurdle to his business success.

While that seems like an easy solution, there are a number of factors Sam should evaluate before plunking down the franchise fee it will cost to join one. Here are some questions he should ask to find the right franchise situation.

What is the reputation of the company?

Before you even consider opening a franchise, you want to explore as much as you can about it. After all, you might love getting your haircut at a certain place, but maybe it has a poor image due to how it treats its employees or customers, or the trend is going toward more upscale salons. You must avoid inadvertently buying into a PR headache or a waning service with a certain brand name.

The other side of reputation is how the franchise system treats its owners. Start with online research to find the buzz about this particular brand name, and then talk to current franchisors in that specific system to validate their own experience. Make sure the business model is as presented and that they have found the parent company to be easy to work with—and of course that their small business has proven to be successful on all levels—both financially, as well as emotionally rewarding.

Is the service/product in demand or oversaturated?

Opening a new business—even one with brand recognition—is one thing, but getting people in the door is another. When thinking of the “best” franchises, you might immediately think of a brand name like McDonald’s, Dunkin’ Donuts or Taco Bell, but sometimes these might not be the right franchise for you.

Instead, you should conduct a survey or focus groups in your regional area to find a potential franchisee market that hasn’t been tapped. While everyone thinks of the “usual suspects,” you should look into something less common but that your vicinity lacks, such as commercial cleaning, cell phone repair or a fitness studio.

It’s wise to invest in market research on existing, similar businesses to confirm you aren’t duplicating what’s already out there with your new business. If these locations exist, are you offering something better (higher quality, lower price, better service) that will differentiate yours?

Analyze current pain points to see where you can alleviate them and build your success on that.

The potential has to be big enough that franchising will be lucrative; in other words that you will recoup your initial investment and earn a steady income, if that’s your goal.

What are the costs?

Franchise costs can be significant, and potentially unexpected. You might look at the initial investment that allows you to buy in to the franchise business model—essentially what you pay to buy that brand recognition—and believe it sounds affordable. But, that is just one obligation.

Nail down the typical start-up costs for everything you need, or which might be required by the franchise system, such as inventory, equipment, signage, real estate, marketing and more. Look into whether a low-cost franchise is right for you, or if you’re better off making a larger initial investment in one with more brand recognition that might start earning money immediately.

Once you have confirmed a complete overview of your financial commitment, move onto the other part of the finances—and that is how costs are shared. You’ll want to dive into the franchise disclosure document (FDD) to determine how you pay the franchisor, in what’s typically known as a “royalty fee,” or a percentage of the gross sales. These typically range from 4% to 12% or more, depending on the business. Some franchise systems also have requirements that you invest a certain amount in new training, refreshed marketing or updated equipment, whether you believe it’s a necessary franchise investment or not.

What support will I receive?

The beauty of working with a franchisor is that they typically have years of experience in the field, and thus have systems in place that can help a new franchise hit the ground running. Find out from the franchise system what support they can offer, such as marketing, advice on real estate site selection, training programs or coaching for new business owners. Discuss what they provide in terms of advice for financing, such as obtaining an SBA loan. The best franchises are those that are devoted to a successful transition for new franchisees and understand the terms have to be mutually beneficial.

Research how their accounting works. Can you use systems you’re comfortable with for purchasing, invoicing, inventory management, scheduling, tax planning and payroll?

Side 2 of Franchising: Running Your Own Franchise

Meet Sarah, a small business owner who runs a successful commercial cleaning business. She can only be so many places at once, but feels that there is value in the name and stature she has built over the years. For that reason, she’s considering duplicating her business model and letting other people buy into her franchise, such as Sam, if he decided a brand name smoothie franchise wasn’t for him.

Are you a Sarah? Here’s what to think about before you leap into franchising.

Do you have adequate time and business savvy to devote to this?

If you’re over your head running your small business now, franchising can alleviate some of that strain—but make no mistake, it can add new ones in its place. You won’t be doing all the day-to-day work of the new business, but you have to have the business acumen to create the vision that will allow it be successful for both parties.

There’s a lot of due diligence required in determining the best franchise model for you—and that’s just the start. You have to vet the potential franchise owners, determine the financing structure, develop a training program and marketing plan, instill the important parts of your company culture, and then ultimately stay involved to make sure the new business is being run as you had hoped. There’s a lot on the line as you put your name out there.

Who is your ideal potential franchisee?

The person you allow into your carefully built “small business” has to be someone you trust will uphold your reputation and build your brand name the right way. For example, if your prominence is built on stellar customer service, that’s a key factor to ensure that they take equally seriously.

It’s important to query whether they have a similar vision for success; someone who believes this is a “get-rich-quick” opportunity might quickly become disillusioned.

Have they been a business owner before with years of experience, and thus understand the many pieces that go into success? Not only will they be selling your product or service, but they’ll also be handling marketing, hiring, training, invoicing, payroll, purchasing—all the requirements of a small business that are crucial to success.

You also should talk to potential franchisees about their goals. For example, what if someone wants to open more than one? They will benefit from economies of scale, but it also can involve ceding more control than you would like. You also have to determine territories and whether they overlap and who has control of certain areas.

Do you have the business model and finances nailed down?

There are many elements to consider apart from the initial investment a franchisor will make. You’ll need to charge your franchisees start-up costs to cover the real estate and training programs, along with any required inventory and equipment.

Then, account for your ongoing royalty fees. One of the most complex parts of establishing a new franchise is making sure that the new business is lucrative enough for the business owner to commit to investing equity—and sweat equity—into the franchise operations, but you have to make money, too.

Don’t hesitate to hire competent legal assistance to ensure that you have an airtight franchise agreement and franchise disclosure document (FDD). It’s wise to work with someone who has experience in this area and can help you anticipate the pitfalls you might be unaware of.

Have you thought through your marketing and sales channels?

If you’ve successfully marketed your current location, expanding those successful strategies to your new franchise operation would appear to be a no-brainer. However, this is where it’s crucial to coalesce around standardization—from the way your logo is used to when and where your tagline can appear. Invest time and energy into dialing into your “brand story,” which is where your reputation, image and value proposition will flow.

Are you prepared for what’s next?

Getting your franchise system set up, including the franchise agreement and FDD and finding franchisees, is crucial. And, once you’ve overcome that hurdle, you might be thinking that it can just run itself. Unfortunately, that’s not the case. You still must be actively involved to ensure they are maintaining your brand standards, customer service, employee relations and financial commitments.

At the same time, you have to recognize that he or she is a small business owner, too, who will chafe at being micromanaged. It can be a fine line to find the balance between helping your newest franchise succeed and being overbearing—and a balance that will continue to be a challenge going forward, as your franchise operation expands.

Whether you are a “Sam,” an ambitious potential franchisee owner looking to be your own boss, or a “Sarah,” a current small business owner who wants to expand while providing franchising opportunities to others, franchising can be an exciting way to be part of the business community.

The key to a successful relationship on either side is to be clear on the responsibilities—and ready to dig in to the hard work—and then reap the rewards of franchise opportunities.