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HOW DO I BECOME A FRANCHISOR?

 

HOW DO I BECOME A FRANCHISOR?

You have a great idea and your company is growing so fast you can hardly keep up, clearly, the market wants more of what you have to offer. There aren’t enough hours in the day to meet the demand and if you had more locations, you could sell a lot more of your product or service. You need and want to grow your business, but the difficulties related to raising capital, hiring large amounts of staff and operating a large entirely corporate-owned chain is cumbersome. 

It could be time to franchise your business, but how do you become a franchisor?

You will need help.  Like any new endeavor, the process of becoming a franchisor has potential risks associated and the business model is unique when compared to other growth models.  Good franchise systems have excellent models in place to benefit all parties involved and that doesn’t happen by accident. 

Franchise consultants exist who can facilitate your becoming a franchisor.

 

To become a franchisor, there is a significant amount of planning, strategy and simply put, paperwork to do.  Experienced franchise consultants can help with this franchise development process every step of the way. The key to choosing the right franchise consultant can be broken into three categories to help franchise your business:

First, does the franchise consultant have a team behind them to support all aspects of the development process?  Make sure the resources and experience exist to support the franchise development process from beginning to end.

Second, do the team of franchise consultants have experience working with start-up franchisors who are new to the market and are working on selling their first 5 units.  This is a unique part of franchise development and requires special processes.

Third, are the franchise consultants compensated on performance and results of the franchise roll out?  You will want people who are vested in your success and have a reason to make sure that the franchise model is effective. 

 

Franchise consultants will help evaluate the franchisability of your business which must be repeatable and have opportunity for scale. They will identify your competition and research where there is opportunity for competitive advantages in the market.  The first step is the franchise Strategic Plan where franchise consultants would help you determine the numbers and structure of the new franchise model. As a new franchisor, you will need guidance in determining what a realistic franchise fee should be for your business; what royalty could be expected as a new franchisor; what kind of territory should be identified; what kind of training you will provide; what the franchisee will need to run the business; what the initial investment will be for the new franchisee along with other key aspects.

 

As franchisor, you will need to create a new and separate entity that will be the franchise business. After the initial planning stage, there is the Franchise Disclosure Document, also known as the FDD. That is the legal document that is presented to prospective buyers of the franchise in the pre-sale disclosure. Some states require that the FDD be registered before you can sell your franchise concept in that state. You should retain a good franchise attorney who can guide you through this process and develop the FDD with proficiency.  This document has 2 main parts, the first part discloses what you as franchisor agree to do for franchisees in plain English. The initial investment is stated again along with franchise fees, royalties, advertising requirements, a P&L, territory, duration of the agreement, trademarks and the training program. The second half is the franchise agreement which outlines the agreement between you the franchisor and your new franchisee. After the FDD, your franchise consultant should help the new franchisor create an Operations Manual for the business. The manual outlines the steps a new franchisee will follow to have a business continue to be as successful as what you, the franchisor, have created. Other franchise consulting services provided to ensure a successful new franchise include a marketing plan and some creative artwork for the logo, a good franchise website and effective advertising.

 

After the paperwork is done, your franchise consultant should carry the staff and the procedures to guide you in the right direction to start selling the concept for you, the new franchisor.

 

Trisha Conner

Franchise Consultant

Franchise Marketing Systems

Trisha.Conner@FMSFranchise.com

 

 

When Are You Ready to Franchise Your Business?

When Are You Ready to Franchise Your Business?

You have a business and want to expand.  There are a variety of ways to expand the number of locations, company owned, bringing on partners, venture capital or franchising. Many businesses decide that franchising could be an extremely effective way to develop a brand and business model without the intensive capital or staffing needs of other channels. But how do you know your business is ready to franchise and how do you know when is the right time to franchise your business? Here are some items to think about if you’re seriously considering whether to franchise your business.

 

1- Is your business currently successful and how do you define that success? If you want to entice entrepreneurs to invest in your brand, it must have a track record of solid revenue growth, dependable profit margins, and a strong customer/client base. Your business may be ready to franchise if the business has credibility based on current success.

 

2- Why is your business successful? Can that success be achieved in other locations in volume? The success must be due to factors that can be replicated and easily taught to others. For example, if your successful concept is based on a service that’s in high demand and isn’t widely available, your business may be ready to franchise if prospective owners can learn how to run your business model. But if the reason your business is successful is due to being located in one hot market or to having unique skills that make you best suited for success, you may not be able to replicate that success.

 

3- Can you afford to franchise? You may be ready to franchise your business if you have the capital to put the necessary franchise infrastructure in place. You’ll need to hire attorneys to provide legal support and all the necessary documentation. You’ll need to set up training, operations, and marketing systems. You’ll need to cover the cost of state registration fees. You may hire franchise consultants. The cost to franchise can range from $15,000 to $100,00 depending on the business.

 

4- Can you sell your franchise business concept to entrepreneurs? How will you convince anyone to spend the money necessary to open a location for your brand? You’ll need to market your business to prospective owners and sell them on your concept. You may be ready to franchise if you can make the argument that between the franchise systems you’ve put into place and the prospect for customer/client demand and revenue, that your business will be a success for anyone willing to take a risk.

 

5- Are you ready to provide the systems to franchise owners for long-term success? If you’re ready to franchise your business, your franchise plan must include systems for training, operations, administration, and marketing. If your business requires equipment, you need to find ways to minimize those hard costs for owners. You may need to offer assistance with lease agreements or attaining the most desired locations. Your business needs to be turnkey for every franchise owner. You may be ready to franchise your business if you have a solid plan for franchise owner support.

 

For more information on when you should franchise your business, contact us for a free franchise consultation:

https://www.franchisemarketingsystems.com/contact_franchise_consultants/