How to Create Franchises

A customer ordering food at at a drive thru.

Starting a franchise is one way to expand your business, brand and operations. It will enable you to reach various segments of your customer base and attract new business. It is not easy to begin a franchise. There are many legal and administrative requirements and procedures to follow.

Things You'll Need

• An established business or business idea.
• At least $5,000 to $1 million capital.

Instructions

Legal Requirements

1. Go to the International Franchise Association (IFA) to research ideas and information.

2. Prepare a standard disclosure agreement, called the Uniform Franchise Offering Circular (UFOC).

3. Check with your state for any requirements to file the UFOC. Keep for your records.

4. Check with your state for additional registration requirements.

5. Hire an experienced franchise attorney to advise you on proper filing.

Finances

1. Raise or have access to $5,000 to $1 million capital for projected operating costs depending on your franchise idea.

2. Prepare audited financial statements for your franchise company.

3. Decide if you want to set up a separate company or use your existing business. Set up a separate company for different services or expand a division within your own business.

4. Hire an experienced accountant to help with financial statements.

System Operations

1. Develop and document a systems manual for the franchisee to run the business successfully.

2. Develop a comprehensive training program for the franchisee. Teach them your marketing and operations techniques.

3. Design a sales system to recruit new franchisees.

4. Hire outside consultants to help implement systems operations.

Tips & Warnings

• Keep in mind that franchisees are not employees. You will have to be careful in your approach with them and be persuasive without being bossy.

• Any business involves risk. Your business can fail without proper planning and implementation.

References

• Entrepreneur; How Do I Start a Franchise?; Jeff Elgin; December 22, 2003
• Frandata: What is a UFOC?

Resources

• International Franchise Association