Franchising your small business can be a successful method for expansion. When you franchise, you will be creating the business systems and legal infrastructure that will guide your business. This infrastructure will dictate recruiting and on-boarding qualified franchisees who will advance your brand and business model.
We have outlined what you will need to consider when franchising and how you will navigate through the franchising process.
Evaluate your Business
Make sure whether your small business is suited to be franchised. Apart from having a track record of sales and profitability in the existing market, there are several important factors you need to investigate.
Consider your Brand Concept
The concept must appeal both to prospective franchisees and end customers. You need to build trust in them that more units will create economies of scale and increase profits. Also, your business needs to be something that you can easily systematize and manage, not something that requires your personal touch to be successful.
Perform Market Research
Do thorough market research of consumer demand beyond your native city for what your franchise business would offer. You can draw upon many sources of information to gather your research. Once research is compiled and analyzed, implement accordingly.
Realize Change is Constant
Becoming a franchiser means you’ll be engaged in entirely different activities than as a business owner. Your everyday roles will be selling franchises and supporting franchisees. Ask yourself if you’re comfortable in the role of a mentor and salesperson, selling and supporting franchisees. If you are not comfortable in this role, do you have a business partner who is?
Learn Legal Requirements
To sell franchises legally anywhere in the United States, your business should complete and successfully register a Franchise Disclosure Document (FDD) with the Federal Trade Commission (FTC). In the FDD, you will be asked to provide complete information about your business, including: audited financial statements, descriptions of the management team’s business experience, and an operating manual for franchisees.
Decision Making
You will have to make many important decisions about your business model as you prepare for legal paperwork. You will also need to make decisions on how you will operate as a franchiser.
Key points include:
- The term of your franchise agreement
- The franchise fees and royalty percentage
- The territory size you will award each franchisee
- The type of training program you will offer
- What geographic areas you are willing to offer franchises in
- Whether franchisees must buy equipment and products from you or will you provide them
- The business experience and net worth franchisees require
- Marketing plan for your franchises (possibly by location)
- Whether you want area master franchisee, who will develop multiple units or an owner-operator for each unit
Every franchiser needs to realize how each of these decisions can affect future profitability.
Paperwork and Registration
Once you’ve made the crucial decisions on how your franchise will operate, you can continue to complete your legal paperwork. Be prepared for authorities to critique the document and possibly demand additional information before they approve your application. While the FTC essentially files your FDD away, you’ll need to wait for state approval.
Hire Key People
As you prepare to become a franchiser, you’ll need to add staff members who will focus solely on helping franchisees. The key hires include; a trainer and a full time “franchise advocate” to answer franchisee questions and resolve problems. You will also need to hire a creative director, a marketing assistant and a franchise-process manager who can help get franchisees to use company software and systems.
Sell Franchisees
Now that you’re in business as a franchiser, one of the most important tasks will be to search franchisees and sell your concept. You can hire in-house salespeople to handle franchise marketing. Selling franchises can be difficult because of the high-risk involved for franchisees. Your sales team should know your business and be able to tell a compelling story about why you’re worth the investment of their time and money.
Brace your Franchisees
You may have encountered several challenges as a franchiser to reach this point in the process. For success, you will have to support your franchisee network. You need to provide quality training programs and other support for your franchisees. Also, you must make sure that your brand provides a consistent experience, no matter which unit customer’s visit.
Concurrently, you’ll need to start marketing your growing chain to drive sales to franchisees. Marketing a franchise involves everything from radio ads, to print ads, uniforms, fliers, logos, and art on company fleet vehicles. Franchisers in need of immediate financial assistance can always obtain financing for business franchising to support your marketing activities.
Franchising your business is a huge step, but the results will be worth it. The benefits to franchising prove that it can lead to a more sound and economic expansion. Franchising is a great opportunity for small businesses to expand their brand beyond their current geographic location; beyond states and even internationally.
