Franchising boosts business growth. In this tough economy, becoming a franchisor is no guarantee of success.
Many business owners dream of having a network of franchisees coast-to-coast or globally. Franchises can be a great expansion strategy that requires less up-front capital than company-owned units.
As a new franchisor, you must make decisions that will affect your business for years. Your business must also comply with federal and state franchise laws, which require a lot of legal paperwork.
This article will walk you through how to franchise a business.
1. Assess Business Readiness
First, ask if your business is franchise-friendly. Most successful franchises offer something familiar with a twist. Pizza Fusion in Florida delivers all-organic pizza in hybrid electric cars.
The idea must appeal to consumers and franchisees alike. More units should increase scale economies and profits. The business must be systematised and replicable, not dependent on your personal touch.
Let us ask ourselves, Is the concept salable? Can we clone it? Is it profitable?
Next, there are a few steps to franchising your business that must be followed.
Most successful franchises try to replicate an already profitable business. Joel Libava, a franchise consultant in Cleveland, prefers to see companies with multiple profitable units before franchising.
Don’t assume your business will be a national hit. Gather market research to confirm demand for your franchise business beyond your home city and room for a new competitor.
You’ll do different things as a franchisor than as a business owner. Instead of pizza or toilets, you’ll sell franchises and support franchisees.
Franchise your business, you’ll lose some control over how your concept is executed. This is how it goes. You have to accept it.
IFA president Matthew Shay says: “Franchisees won’t do it exactly how you would, even if they do well.” “If you won’t let anyone touch your concept, franchising may not be for you.”
Siebert suggests considering other options before franchising. Slower growth, debt financing, or partnerships may be better options depending on your situation.
2. Know the Law
Though this is the second step, it is the most important steps to franchising your business. Your business must register a Franchise Disclosure Document with the FTC before selling franchises in the U.S. In the FDD, you must include audited financial statements, a franchisee operating manual, and management team business experience.
Some states have franchise sales rules beyond the federal FDD. Libava says California and Illinois have the toughest registration processes. If you want to sell in these states, you must meet their additional requirements.
We recommend hiring a franchise consultant or attorney for advice and assistance. Often, a new company is formed as the franchisor. Find an expert who can check your work.
3. Legal Aspects
As you prepare your legal documents, you’ll need to make many franchising decisions. Included are:
- Fees and royalties.
- franchise contract terms.
- In what geographic area will you offer franchises?
- Type and length of the training programme.
- Whether franchisees must buy company wares.
- franchisees’ business experience and wealth.
- franchise marketing.
- Whether you want owner-operators or area/master franchisees to develop multiple units,
Weather and local laws may affect franchisees’ success. Too-large territories may have to be split up later at a premium. Insufficient training can leave franchisees unable to implement your system.
- Create paperwork and register as a franchisor
You’re ready to complete your legal paperwork once you’ve made key franchise decisions. When you submit it, authorities may request more information before approving your application.
The FTC files your FDD, but state approval is required.
5. Hire key people
As a franchisor, you’ll need to hire employees to help franchisees. Solar Universe sells solar panels to franchisees, so founder Bono needed a full-time order desk employee. The company hired a trainer and a full-time “franchisee advocate” to answer questions and resolve problems.
6. Sell franchises
Now that you’re a franchisor, you must find franchisees to buy your concept. Lillian’s has sold all its franchises by word of mouth and has no sales rep.
Solar Universe has two in-house franchise salespeople. The company has partnered with FranNet, whose consultants may present it to prospects. Franchise fairs and independent franchise marketing firms are other common sales techniques. Your salespeople should know your business well and be able to convince customers to invest in it.
7. Help franchisees
As a franchisor, you’ve been through a lot. A chain succeeds or fails when it begins supporting its franchisees. Your training programs and other support efforts will create quality control.
If you run 10 restaurants, you have thousands of new employees every year. Without ongoing training, bad habits can fester.
Start marketing the growing chain to franchisees. Many new franchisors underestimate marketing and support costs. Radio and print ads, uniforms, logos, fliers, and van logos are included in marketing.
Why Franchise your Business?
It’s natural to want to expand a successful business. Many business owners turn to franchises because opening new locations takes time and energy. Here are two major benefits of franchising.
Replace store managers with owner-operators or investors.
Finding and training qualified management is a huge roadblock to expanding businesses. Franchisees train managers instead of owners. Franchisees work hard because they’ve invested and have a stake in their business’ profits.
A franchisee can build a strong business unit, market, find a site, negotiate a lease, hire and train staff, etc. without worrying about other locations. Their business is a priority.
Starting a second (or third, or fourth) location is a great expansion strategy, but it’s expensive. Franchising can save you money on these three items that opening a new location can’t. Franchising isn’t free or easy, but it’s a cheaper growth strategy.
With the right help, franchising your business will be worth it. The above advantages of franchising show that it can lead to more sound and economic expansion, a stronger dedication of franchisees versus managers, and greater growth potential by having individuals run each location instead of managers.
Your brand can become a trusted, recognisable one with dedicated people behind it. Here’s how Accurate Franchising can help you franchise your business.
There are many things to consider before and during the franchising process. How do you know where to begin when franchising a business? Accurate Franchising, Inc. identifies three franchising phases.
During the initial business assessment, you must ask tough questions. During this phase, you’ll decide if your business can be franchised and how to proceed.
Three questions to be pondered upon:
- Is my firm franchisable?
- Franchise growth?
- Is my business franchise-ready?
Schedule a FREE Franchise Feasibility Consultation to see if franchising is right for you. Start with a thriving small business. Your business must be easily replicated, appealing to consumers and franchisees. It must also be profitable for both you and the franchisee.
Phase 2: Franchising
Developing the infrastructure to transform your business into a franchise is crucial to franchising. AFI helps you franchise your business by creating a franchise plan that includes:
- Brand strengthening
- IP protection
- Franchise planning
- Training programmes, manuals, and materials
- Franchise attorneys
There’s more to franchising than waving a wand and saying, “I’m ready!”
Franchise recruitment depends on marketing and sales. All the preparation you did in phase two will help you show prospects your resources and tools to run their businesses.