If you are a business owner and your business has been doing well, then you may be ready for expansion. However, the thought of owning and operating multiple locations may be a bit overwhelming for you—especially if you already put in a lot of work into running your current business location. If this is the case, then you may want to consider an alternate route to expansion—franchising.
Franchising will allow you to grow your business and build your brand by selling the rights to operate new store locations to other entrepreneurs. While you'll still have to do some work in regards to providing support and making sure that your franchisees have every chance at succeeding, franchising your business will take much less effort than running multiple locations. So how do you franchise a business? The following are some of the steps you'll want to take to get started:
1. Preparing Your Business
You have to make sure your business is in good shape and that you're ready to franchise before going ahead with the process. This includes:
- Making sure you have a good concept - To work as a franchise, your business needs to have a unique selling proposition. For example, if you're trying to franchise your burger joint, you need to have something that makes your burgers special. Maybe you only use organic ingredients. Or maybe the ingredients you use are unique in themselves. If it's just another burger joint, then it may not work as a franchise even though it works as a single location.
- Making sure you're in good financial shape - Don't try to franchise your business because your one location is starting to struggle and you think that franchising will bring in more revenue. Nobody is going to want to invest in a franchise where the franchisor is in poor financial shape—it's too big of a risk. Your business needs to be profitable.
- Making sure there's a demand for your business - Your concept may work in your city, but is there a country-wide demand for it? If your burger joint is unique because every burger is named after famous people that went to the state university down the street, it's probably not going to do well on a national level.
You should also prepare for a change in your role as a business owner as well. Instead of selling products or providing services, your role will be more of a teacher, salesperson and supporter.
2. Meet the Legal Requirements
To legally sell franchises in the United States, you will need to complete and register a Franchise Disclosure Document with the FTC (Federal Trade Commission). The Franchise Disclosure Document will require a lot of information about your business, from an operating manual for franchisees to audited financial statements and much more.
Some states have separate rules for franchising as well that will require you to register as a franchisor at an additional cost. Because all of these legalities can be quite complicated and can prevent you from franchising your business if you don't understand them or are unable to meet their requirements, it's a good idea to work with a business advisor with some expertise in the matter.
3. Create Your Business Model
This business model will include how you decide to operate as a franchisor and should include things like the franchise fees and royalty percentages, the terms of your franchise agreement, the size of the territories, the geographic areas you want to franchise in, how you plan to market your franchises and more.
4. Hire the Right People
You're going to need a staff whose job it will be to focus solely on your business's franchising. This includes a franchise advocate, a creative director, a marketing assistant and a franchise process manager, just to name a few.
5. Begin Selling Your Franchises
Once you're legally set and you have your business model and staff in place, then you can begin selling franchises. This isn't as easy as it sounds—you're going to have to find potential buyers that are qualified and then convince them that your concept is worth investing in.
These are the steps you'll need to follow in order to franchise your business. Franchising is a very involved process that requires a lot of legalities, which is why you may want to work with a franchise broker. A franchise broker will not only help guide you through the process of franchising your business but can also help find buyers for your franchise.