Franchising a business can be quite profitable and can provide exponential growth which otherwise is hard to achieve. It gives the franchisors a chance to expand their businesses manifold within a shorter period of time and this leads to generation of more profit and more capital gain.Franchising your business is a proven route to rapid growth. But becoming a franchisor is not an automatic ticket to success, especially in this challenging economy.
Still, many business owners dream of seeing their brand become a household name, with a network of franchisees from coast to coast or around the globe. When the right concept is franchised effectively, it can be a great expansion strategy that doesn’t require as much up-front capital as growing through company-owned units.
If you’re considering franchising your business, know that the process of becoming a franchisor is usually long and involves considerable cost. Just because you qualify to sell franchises doesn’t mean you will find buyers.Becoming a successful new franchisor entails making many thoughtful decisions early on that will affect your business for years to come. There’s also a lot of legal paperwork to wade through to make sure your business complies with federal and state laws that regulate the franchise industry.
You need to first make a decision if franchising your business is a good decision in order to learn how to franchise a business successfully. You should consider what type of business that you own and what name it would carry if you were to franchise it. This, of course, takes a large amount of consideration in order to be able to make the best possible choice.
Here are the 4 main steps to Franchising a Business:
1. Legal Document Creation
2. Operations Manual Creation & refinement
3. Marketing Plan Creation
4. Sales Process Creation
Each of these 4 parts is critical to the success of a new franchise business. All too often I talk with an emerging franchise that didn’t complete steps 3 & 4 prior to starting to franchise and they are struggling to sell franchises.
If you wish to franchise your business, then there are practical steps that need to be taken to start the process of evaluating your business to see if it would be possible to franchise. Once you have decided on the franchising route then a clear plan of action is required.
One of the first steps would be to conduct a series of research studies to truly understand what your particular industry segment looks like in the franchise marketplace. There should also be a legitimate study done on the financial dynamics of your franchise competitors.
In the next step, write down a good business plan. The business plan and the successive growth path should be clear and realistic. It should contain information on funds, objectives, mission and vision of the business.
Here are a few steps you’ll need to take along the road to becoming a new franchisor:
1) Consider your concept. Most good franchise concepts, he says, offer something familiar, but with some unique twist to it
2) Check your financials. Most successful franchises take a business that’s already profitable and try to replicate that success in other locales.
3) Gather market research. Don’t rely on your gut feeling that your business would be a smash hit across the country. Gather market research to confirm there is widespread consumer demand beyond your home city for what your franchise would offer, and room in the marketplace for a new competitor.
4) Prepare for change. Becoming a franchisor means you’ll be engaged in entirely different activities than you were as a business owner. You’ll primarily be selling franchises and supporting franchisees now, instead of selling pizza or fixing toilets.
5) Evaluate other alternatives. Before you plunge into franchising, you may want to consider other options, Siebert says. Depending on your situation slower growth, finding debt financing or taking on partners are all alternatives that may prove better ways to move forward.
6) As you prepare your legal paperwork, you’ll need to make many decisions about how you’ll operate as a franchisor. Key points include:
-The franchise fee and royalty percentage
-The term of your franchise agreement
-The size territory you will award each franchisee
-What geographic area you are willing to offer franchises within
-The type and length of training program you will offer
-Whether franchisees must buy products or equipment from your company
-The business experience and net worth franchisees need
-How you will market the franchises
-Whether you want an owner-operator for each unit or area/master franchisees who will develop multiple units
Once you’ve made the important decisions that shape how your franchise will operate, you’re ready to complete your legal paperwork. When you submit it, be prepared for authorities to critique the document and possibly demand additional disclosures before they approve your application.
One of the most important steps in franchising a business is the franchise documentation. If product planning stage is number one priority of your company then incorporate those points in thefranchise documentation. Proprietary assets (like recipes, formulas, methods, branding, operating techniques and customer information) need to be identified and protected. A catchy and appropriate name, logo and tag lines are registered as trademarks or service marks.
In order to impart business day-to-day operating skills to franchisees as well as to ensure uniformity of products and services, a franchise operations manual and franchise training program are developed, often from scratch. The franchise operations manual and training program curriculum must be carefully drafted or edited. At times the business practices may slightly vary from one state to another, and these points have to be incorporated in the franchise operations manual.
In the final step of franchise documentation process, a FDD or Franchise Disclosure Documentis prepared by a competent franchise attorney. A franchisor’s Franchise Disclosure Document is a company outline, legally required to be written in plain English. This document provides a detailed overview of the franchising organization, its history and many specifics about its existing franchises. By law there are certain key facts that must be divulged by the FDD, regardless of how it may reflect on the franchisor. All franchisors are legally required to provide a FDD prior to any sort of legally binding commitment between themselves and a potential franchisee.
At the same time, you’ll need to start marketing the growing chain to drive sales to franchisees. Many new franchisors underestimate how much this marketing and support effort will cost. Once you have the legal documents in order, your next step is to market your business to potential investors. Creating the perfect marketing pitch and attractive franchise business plan will help you attract interested buyers.
As a franchisor, you’ll have gone through a lot to reach this point. But here – at the point where you begin supporting your franchisee network – is where a chain ultimately succeeds or fails. Your training programs and other support efforts will create quality control.
Franchising is an ideal way to expand your business. However, before franchising your business successfully, chalk out your business objectives and the operations using which you want to franchise your business. Accordingly make your business plan and the franchise plan.