How to Franchise Your Business


According to many successful business owners, franchising your small company is maybe one of the best ways to grow fast. Determining whether franchising can work for you or not is simply a matter of knowing the ins and outs of your company and yourself.

Starting with the creation of a Financial Disclosure Document and ending with the decorations that will be in your store window, when you’re on the verge of turning your business into a franchise you need to remember that the devil is in the details. Still, the reward can be extremely lucrative given the fact that franchising is one of the greatest ways of expanding a company and ensuring it will grow quickly.

According to the data released by the U.S. Census Bureau back in 2010 (the first report that gathered information regarding franchises), franchises accounted for 10.5 percent of business across 295 industries in 2007. Moreover, franchises made up for $1.3 trillion in revenue and $153.7 billion in payroll allocated to 7.9 million workers.

If you are a business owner that is interested in becoming a franchise, remember that there are franchise consultants that can help you through the process. You’d be surprised to know how many people turn to consultants when they want to turn their small business in a franchise. While some are still at the stage where they want to scale and grow, others already have some level of success and look to enhance it. This type of business owners want to use the skills of the consultants and rely on other people’s capital to grow their brand.

Here are some tips for small business owners that are considering turning their business into a franchise:

1. Know the ins and outs of your company. However, business owners are usually accustomed to running their businesses on intuition. Also, it may be difficult for them to itemize the important tasks they have to fulfill on a daily basis. Franchisees do not have the privilege of improvising. Moreover, they will need to be trained on keeping the books, ordering supplies, the hiring process, etc. And each step of the process must be carefully outlined. To some degree, the company owner may need to rediscover how and what it’s like to run a business for the first time.

For some business owners, spending a lot of time trying to figure out how to increase revenues and ensure that the company is registering an ongoing growth leaves no time to think about franchising.

2. Know the legal issues that arise once you turn your business into a franchise. Business owners who are seeking to turn their companies into franchises should pay close attention to Item 19 on their FDD filing. In this field the franchisor outlines financial performance information. In most cases, franchisors that smell there is something wrong with the business’s Item 19 will usually decline to work with them. Given the fact that taking on these legal complications could prove to be a daunting task, franchisors should seek out professional help.

Take for example The International Franchise Association; it’s a great resource when it comes to legal issues surrounding franchising. The IFA gathers information on franchises, lobbies for legislation favorable to franchises and offers resources and even aid to companies that are looking to become franchises. Moreover, the association publishes reports on the legalities involved in franchising, even one titled An Introduction to the Law of Franchising. So if an interested small business owner survives plowing through almost 500 pages and manages to understand most issues, this says a lot about an entrepreneur’s conviction.

3. Know the manner in which you want to grow. Yes, the idea of growing is appealing to each and every company owner. Still a small business owner wants his/her company to scale at a reasonable rate. While for some companies interested in becoming franchises may mean that the new business models refers to a coast to coast expansion, for others, it may refer to adding a number of new outlets. Franchising consultants recommend growing at the rate that is natural to your company.

When small business owners approach consultants to explore the franchising potential, the first thing the specialist should do is sit down with them and examine their proof of concept. When a franchise wants to register growth, business owners have to consider where their business model will work and how much can the brand expand into an unfamiliar environment.

4. Franchisers will always screen its franchisees. Maybe there are hundreds of other people waiting in line and anxious to open a franchise with an outstanding name. However, that does not mean that they should become franchisees. Remember that once you (a small business owner) become a franchisee, you represent the brand, its values and have to deliver outstanding products/services. Therefore, make sure you have a system in store to determine if your company is headed in the right direction in the new market or if it’s all going to go downhill.

While most business owners are enthusiastic about franchising their company, the over enthusiastic ones tend to get rejected. In this case, the personality of a business owner is just as important as providing the documents and the financial information. Business owners that seek to turn their business in a franchise have to have an equal amount of passion and substance. A great deal of thoughtfulness and measure are a bit more important than enthusiasm about their company.

5. Be aware of the restrictions set in place. Even after franchisors are given specific information regarding hiring, training and other such practices, there are some freedoms that will be allowed. When the franchisor will take a step back from the daily operations, small business owners will have to rely on their judgments as they explore new business opportunities.

Franchises have different ideas regarding the restrictions they place on their franchisees. The former category will struggle on finding a balance between maintaining the brand identity with the personal touch of individual franchise owners. When you are prepared to turn your company into a franchise, remember that growing the brand should always be the end goal.

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