You started your own business. You put in the twenty hour days to get it off the ground because you believed in it, and you knew it could work. Now you have a very successful business. You are making money based on a sound idea and a high level of customer service. Now you see your business in every shopping mall and on every street corner in America. You are ready to franchise your business. Where do you start?
What exactly is a franchise? A franchise is a network of interdependent businesses that have a relationship that allows a number of people to share three basic things. First of all they share brand identification. They are all selling the same product in the same manner. Second, they are sharing a business model with a proven track record for success. Finally, they all share a common distribution and marketing system that allows them to do business extremely efficiently. The common goal is to grab a large chunk of the market share and gain more customers than your competitors.
When you own a business and you franchise it, you are selling the right for others to use your brand name. People are investing their money into your brand name to utilize your operating system and to use your ongoing support. There are obviously many advantages to buying a franchise, and you will undoubtedly use these to sell your business model to others. The people buying your franchise will find comfort in the fact that there are other people facing the exact same problems everyday. This network will allow people to deal with the daily challenges together.
There are obviously things to be aware of when franchising your business. If you sell a franchise to an individual, and that individual fails, this will hurt the entire group. This is why many companies set the bar very high when selling a franchise.
There are four basic things you will need to have in place and possess before you can think about franchising your business. Let’s go through each one so you have an idea about the plan you will need to have in place.
First of all, you will be required by the Federal Trade Commission to prepare a standard disclosure document for your franchise. This document is called Uniform Franchise Offering Circular (UFOC) is required by all companies. In addition to this, there are many states that have their own requirements. Make sure that you look into the laws pertaining to the state you plan to franchise in.
Second, you will be required to prepare an audited financial statement for the franchise company. This is actually one of the requirements under the legal section we mentioned above. You won’t be able to complete any of the legal requirements until you have first completed the financial statement. You will need an experienced account that is familiar with franchise accounting. This person will advise you on the financial structure of your enterprise.
Third, you will need to create and meticulously document your franchise system. This is the guideline you will use to make sure that your franchises run in the manner that you have set up. All of the franchises will run in the exact same manner. This document will teach each person to run their franchise in the same way that made your initial business successful. You will also need to formulize your marketing plan that will drive new customers to the new business units. You will also need to formulize and utilize a sales system that will help you sell your franchise.
Finally, you will need to have the right mindset to run a franchise. In your current business, you have employees that probably do as they are told with little resistance. This will not be the case with your franchise. You will have to be careful not to treat your franchisers as employees. Use the power of persuasion to try and get people to do what you want. The most successful franchisers treat the people that purchase their franchises as partners rather than employees. This persuasion method may take longer to achieve results, but in the long run everyone associated with your company will be happier.
Franchising is obviously a great way to expand your business. Make sure that you have done all the planning and understand the legal requirements for your particular state. Do as much research as possible and make sure that you have all the bases covered before you make your first sale.