How to Create a Franchise Business

Franchising is a great way to grow a business.

The legal definition of a franchise is a business opportunity that grants a licensee the use of a name brand and a set of business processes or systems, in exchange for a set of upfront and ongoing fees. Turning your business into a franchise is a complex task even though the definition of a franchise may sound so simple. There are dozens of franchisor consulting firms and franchisor attorneys around the country that can help you create a franchise out of your business. The quality of the services performed and the fee structures can vary greatly, so be sure to shop around as you develop your franchise.

Instructions

1. Build a profitable, repeatable business. For your franchise concept to succeed in the marketplace, you must be able to demonstrate that it can be duplicated and that is a profitable business. The franchise industry is very competitive and its critical that your brand posses a unique selling proposition that can set it apart from the other franchise opportunities available in the marketplace today.

2. Document everything to create training and operations manuals. Once you've built a profitable business system, document all of it. You'll need to train others on how to run the business system you invented. Franchisors should give franchisees operations manuals that describe how the business is to be run, and franchisors should document their training process in a training manual.

3. Get your business name trademarked. While a business could be franchised without the franchisor trademarking the name brand, franchisees buy into franchise systems because of the strength of the franchise name brand.

4. Set your franchise fees. The last step that needs to be accomplished before setting up your franchise legal documents is setting your franchise fees. Work with franchise industry consultants or your franchise attorney to determine what fees are most appropriate for your industry and concept. Expect to set up both an upfront franchise fee and an ongoing royalty fee for your franchisees to pay.

5. Have an attorney draft a franchise disclosure document and franchise agreement. The federal trade commission requires that a disclosure document be given to all prospective franchisees at least 14 days before they sign a franchise agreement. The disclosure document will outline 23 specific pieces of information about the franchise. The franchise agreement is the actually licensing arrangement and contract between the franchisor and franchisee. Only a qualified franchise attorney should draft these documents.

References

• Entrepreneur: "Franchise Your Business"

Resources

• FranchiseINC!: "Franchise my Concept"