The Blueprint for Franchising Your Business: When, Why, and How

franchising your business

The Blueprint for Franchising Your Business: When, Why, and How

We often hear people talking about franchising, but not many business owners know where to begin. When it comes to franchising your business, it is important to first note the process. Essentially, franchising means that a franchisor gives a franchise the right to use their trademark and know-how in exchange for certain fees.

If you have already done the work of building a brand, franchising is a great way to grow that brand, allowing others to become owners of a single—or multiple—locations.

Some of the biggest household names are franchises:

·      McDonald’s

·      Planet Fitness

·      ACE Hardware

·      Wyndham Hotels and Resorts

·      H&R Block

While your business may not be as common as these—yet!—your business can still be set up just as these leaders’. A good resource tool to get started on educating yourself about the possibility of franchising your business is 

However, failing to go through the proper legal steps initially could hinder you in the long run. We recommend you speak with a franchise attorney to ensure you have the proper business structure that will allow for the rapid expansion that franchising entails. Speaking to an attorney will also ensure that your brand and proprietary processes are protected. 

Why choose to franchise?

Franchising your business allows for faster expansion. This is true because you can begin selling your products or services in more locations without additional work on your part. With a franchise, you are simply paid a fee and a royalty to help the business owner get set up under your business umbrella.

You, the founder, are able to have a more passive role in the “affiliate business” than you would if opening a new location on your own. Building a franchise allows you to have a smaller day-to-day involvement and simply oversee the larger role of the organization, such as advertising, brand development, and keeping your investors happy, should you have them.

When is the right time for franchising your business?

The idea of expanding your business in this way is exciting, and many business owners will think about jumping into franchising too early in their business’s life.

We recommend that you have at least a couple of corporate stores for no less than two years prior to deciding to franchise. There is no legal requirement to abide by this guideline, but it is what we recommend to our clients. This helps to ensure that you are familiar with the economic cycles of your business.

Also, your business’s procedures and operations will need to be easy to replicate. Though your processes could be unique —the sole reason your business is franchisable—it still needs to be easy for a new owner to follow.

How to move forward

Ready to move forward with franchising your business? We have helped many owners in your situation and would be happy to walk you through the process. Contact us today to learn more about how we can help. In the meantime, here are our tips for moving forward:

  • Learn your product or service well prior to thinking of having someone else sell it for you. You need to know the ins and outs of your product or service to be able to train your franchisee to sell it. Also, study your market and target market and learn about your competition. 
  • Prior to selling any franchises, hire a franchise attorney to help you with the process. The sale of franchises is a highly regulated field. There are Federal and State laws which may apply to your franchise sales, so it is important to have an attorney by your side to help you decide on the best corporate structure for your franchise and your franchise model. Your attorney will advise you so that you are in compliance with all applicable franchise disclosure laws and will assist you in drafting the Franchise Disclosure Document (the “FDD”) and the Franchise Agreement.
  • Set up operations procedures, policies, and systems for your business that you can teach your franchisees. You will need to create an Operations Manual. 
  • Select your franchisees carefully. Check that their backgrounds match your company’s model, goals and image; interview them; have them fill out a questionnaire and evaluate if they are a good fit for your business. This could prevent many headaches down the road. 
  • When franchising your business, choose your franchise model and the target territories in which you plan to expand and sell your franchises. 
  • Protect your brand, know-how, and procedures. Create very specific rules and guidelines as to who can use your brand and how. Also, your franchise attorney will help you draft clauses in the franchise agreement that protect your company’s proprietary and confidential information.
  • Support, listen and train your franchisees. Get your franchisees involved and listen to their needs and challenges. They will be your best sellers and keeping them feeling involved will help you prevent potential problems and adapt your business to new market trends.
  • Train your sales team to help you sell without making inadequate financial performance representations which may violate Federal and State franchise laws. 

Are you ready to start a franchise? Get in touch with us today. Our experienced attorneys can walk you through the steps necessary. 

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