How to Turn Your Business Into a Franchise
Franchising lets your business grow without the chance of your business incurring debt or equity cost. And because your franchisees will supply the first investment, it also lets you grow with modest capital investment on your behalf. Additionally, franchising lets you increase with practically no contingent liability because the franchisee signs the lease and agrees to service contracts.
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Things You'll Need
- Business plan
- Operation manual for your business
- Appropriate legal documents
- Marketing material (brochures, booklets, etc.)
Instructions
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Determine if your business is able to be franchised. While a franchise is fairly flexible and almost any company can create one, your business does need to meet some necessary qualifications. It should:
Be trustworthy. Your business should have skilled management, proven achievements and good press or public approval.
Be one of a kind. It should be noticeably different from the competition, sellable as a business opportunity and have a clear competitive advantage.
Be trainable. Your methods should be prepared, operating processes should be recorded and an individual should be able to learn how to run your company in three months or less.
Give a sufficient return. You will have a hard time keeping your franchisees pleased if your company cannot produce 15 percent to 20 percent return on investment after taking away royalty (usually 4 percent to 8 percent). -
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Create a plan for growth. It needs to consider the many concerns that a new franchisor faces including: how fast the business grows, staffing, support services and fee set-up.
Bigger companies should tackle more difficult issues like channel and anti-trust matters and resource distribution. The whole plan should undergo thorough financial examination to adjust your business's growth method.
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Obtain the appropriate legal documents. You will at least need a franchise contract, an offering circular and, depending on where franchises will be sold, state registrations. Also, there are some regulatory and legal rules at the federal and local/state level you have to deal with before selling your franchise. You might also be required to register with the state or federal authorities prior to selling franchises and meet particular criteria as to how the franchise is established. Once things are in progress, some states remain a part of your and your franchisee's relationship.
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Establish quality control. This means making an operations manual that has the systems your business uses and the checklists, policies and strategies that will let your systems be implemented consistently. Also, your operations manual should deal with problems that could cause allegations of negligence if you are going to have successful protection against consumer liability.
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Learn to promote and sell your franchise. You will need to learn how to attract potential buyers and know what material will assist you in generating the sale (such as DVDs or brochures). Additionally, because franchise sales are very controlled, you'll need to learn about proper sales, disclosure and compliance procedures.
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