Sign up for email updates from SBAReceive helpful business tips and upcoming events in your area.


Privacy Policy
Log in to SBA.gov:
Enter your SBA.gov username.
Enter the password that accompanies your username.

Community Header Banner

Starting a Home-Based Franchise Business; 6 Steps to Help You Find the Right Opportunity

by Caron_Beesley, Community Moderator

  • Created: July 20, 2010, 4:45 am
  • Updated: March 28, 2013, 3:19 pm
Share:
4 comments

More often than not, when we think of franchise opportunities, we tend to think of businesses with a physical Main Street, strip mall or commercial office presence, (think Subway, 7-Eleven or Keller Williams Realty). However franchises can be found everywhere, including your home.

 

According to Franchise Direct*, home-based franchises are now one of the most popular franchise sectors out there. A trend that aligns closely with data from the Small Business Administration that reports that home-based businesses now account for an estimated 52% of the 29.6 million small businesses in the U.S.

 

I;s not hard to see why. Operating a franchise out of your home combines the best of both worlds- providing the flexibility and affordability of operating a home-based business with the low barrier of entry that franchise business ownership can (sometimes) bring.

 

And the good news is that more and more franchisors (those are the folks who operate the franchise and whom you enter into a contract with) are either adding home-based options to their franchise programs or are focusing exclusively on the home-based distribution model in order to reduce operational costs.

 

If you are interested in starting a home-based franchise business, here are six points to consider in your research:

 

Can you Effectively Work from Home?

 

Operating a business out of your home requires a certain type of personality, discipline, work-space set-up and so on. For a useful 360 degree perspective on assessing your suitability to run a home-based business, as well as tips to get you started, take a look at the Business.gov Home-Based Business Guide.

 

Of course, while your-business headquarter' may be your home-office, the franchisor may require that you spend a large amount of your time marketing, selling, or just conducting business out and about in your territory' something to consider if family or other commitments dictate that you work out of your home-office most of the day.

 

Can you Legally do Business from Your Home?

 

Even if you think you are up to doing business from your home, your local government may not agree. So be sure to research what restrictions the law places on doing business out of your home.

 

For example, some states forbid the use of residential kitchens for commercial food production. Check what restrictions apply in your locality by reviewing these Zoning Laws for Home-Based Businesses. If you live in a neighborhood managed by a Home Owners Association (HOA), your business activities may be restricted to your HO's Covenants Conditions and Restrictions rules. This article' Can a Homeowners' Association Ban Your Home-Based Business?' offers some quick facts about the law and your rights.

 

Do You Have that Special Personality to be a Franchise Owner?

 

Yes, it does require a certain type of personality to make a success of a business idea or system that is essentially someone els's. You need to be able to work within the rules of others; give up a certain percentage of your gross sales revenues to your franchisor; and your territory will be restricted, to name just a few of the stipulations of being a franchisee. For more insight into the'franchise personalit' and whether you can fit into that mould, read Do You Have that Special Personality Needed to be a Franchise Owner? by fellow blogger and franchise specialist - Joel Libava*.

 

What Type of Opportunities are Out There?

 

So thinking beyond Main Street and the strip mall, what home-based franchise opportunities are out there? If you are looking for ideas, a great place to start is Entrepreneur.com's 2010 Franchise 500® - Top Home-Based Franchises list. Select any name on the list for a brief overview of each opportunity together with at-a-glance information on investment costs and fees, training and support, and rankings.

 

Another useful source is the International Franchise Association's a Find a Franchise* search tool that allows you to search for opportunities based on industry, location, financing, etc. (use the keyword search to find home-based franchises).

 

How Do You Assess a Home-Based Franchise Opportunity?

 

How do you know when you've found the right opportunity? Assessing a franchise requires research and due diligence. To help you understand what steps you can take to determine how a franchise stacks up read Joel Libava's tips on how to research a franchise.

 

The law can also help you assess a franchise because it requires that franchise owners provide you with a Detailed Disclosure Document during the pre-sale stage. This is an essential piece of information that can provide valuable insight into your chosen franchise (including financial statements, contact information of other franchisees, and so on). Read Investigating a Franchise Opportunity - How a Little Detective Work and the Law can Help for more information.

 

Employ Professional Help

Because the tax rules surrounding franchises are often complex, an attorney - preferably a specialist in franchise law - can help you evaluate the franchise package and tax considerations. You might also want to consider using an accountant to determine the full costs of purchasing and operating the business as well as assess your potential profit.

 

*Note: Hyperlink directs reader to non-government Web site.

 

Related Articles

 

Additional Resources

 

 

About the Author

Caron_Beesley's Profile Picture
Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley
Tags: Community Blogs, Small Business Matters

Comments

Indianapolis | Window Shopper | 7/26/2010 - 6:16 am

Another item to consider is how your homeowner's insurance will be impacted by running a business out of your home. Most policies limit the coverage for business property to $2,500, meaning if you have more product than that and you had a fire, there would be no coverage. Also, most homeowner's policies exclude coverage for any business related lawsuit. Even though you may be running a business out of your home, it's still necessary to get a Business Owners Policy (BOP) to make sure you are properly protected. A friend of my, an Indianapolis handyman, runs his business out of his home. However, he never has clients visiting him there, so his exposure is much more limited. ---This post was edited to remove a commercial link. Read our discussion policies for more Community best practices.

Indianapolis | Window Shopper | 7/26/2010 - 6:16 am

Another item to consider is how your homeowner's insurance will be impacted by running a business out of your home. Most policies limit the coverage for business property to $2,500, meaning if you have more product than that and you had a fire, there would be no coverage. Also, most homeowner's policies exclude coverage for any business related lawsuit. Even though you may be running a business out of your home, it's still necessary to get a Business Owners Policy (BOP) to make sure you are properly protected. A friend of my, an Indianapolis handyman, runs his business out of his home. However, he never has clients visiting him there, so his exposure is much more limited. ---This post was edited to remove a commercial link. Read our discussion policies for more Community best practices.

dwalters | Window Shopper | 7/26/2010 - 6:15 am

I wonder what impact local governments have on the number of home based businesses. A local community requires licensing for every business that is in their city limits. When you go to get your license that make sure that you are in a commercial location. Once they find that you are in a home they deny the license. Darrell Walters, Integrity Mortgage Funding, Newnan mortgage ---This post was edited to remove a commercial link. Read our discussion policies for more Community best practices.

dwalters | Window Shopper | 7/26/2010 - 6:15 am

I wonder what impact local governments have on the number of home based businesses. A local community requires licensing for every business that is in their city limits. When you go to get your license that make sure that you are in a commercial location. Once they find that you are in a home they deny the license. Darrell Walters, Integrity Mortgage Funding, Newnan mortgage ---This post was edited to remove a commercial link. Read our discussion policies for more Community best practices.