Expanding your business is a great way to create more revenue streams, more jobs, and new revenue opportunities. Franchising allows business owners to grow, develop new markets, and capitalize on their success.
The owner of these franchises is thus able to use their business as a springboard for other potential opportunities, continuing its growth by reinvesting any profits into other investments. Here is how to franchise a business the right way.
What Is Franchising in Business?
A franchise includes the franchisor, the owner of the original business, and the franchisee, the person or company buying the business concept and trademark. The franchisee is allowed to open a branch using the same business model as the original owner.
As a franchisor, you provide franchisees a license to use your trademarks, copy your business model, and gain access to your ongoing support and training. In return, franchisees will pay you a one-time initial franchise fee and ongoing royalty fees.
The franchise partnership is formally documented through a franchise agreement.
A franchise is a way for the original business owner to expand their business with a low investment.
The Best Way To Create a Business Franchise
Before creating a business franchise, there are several things to consider. Different methods will be more suitable for your business depending on your goals and the investment you’re willing to put into your franchise. Here is a step-by-step strategy to follow.
Ensure That Your Company Is Franchise Ready
When you franchise your firm, you begin a new journey as a business owner and founder to learn about franchising, enter the franchise market, and establish an organization that will provide training and support and helps successful franchises.
As a result, your company must have a proven track record of financial success and solid mechanisms to train and support potential franchisees as your system expands. Focus on core values and key performance indicators (KPIs) for assessing success.
Core values can cover a wide range of topics, such as the founder’s history, mission statements, distinguishing characteristics of the business, and how franchisees will improve the quality of life for their clients.
Prepare and Publish Your Franchise Disclosure Document
The next step in how to franchise a business is creating a franchise disclosure document. A franchise disclosure document (FDD) is a legal and binding contract. The FDD is the pre-sales document provided to franchisees before paying fees or executing the franchise agreement.
The FDD contains information about the financial performance and investment required for franchisees to operate their business and all the risks associated with investing in a franchise.
Federal and state franchise regulations oversee franchising. A qualified franchise attorney should help franchises create an FDD that complies with federal and state franchise rules.
Create Your Franchise Operations Manual
A franchise guide is a business manual that provides franchisees with instructions on running and managing their business. It shows them how they will develop and operate their business, provide training and support as it expands, and give them the proper tools to improve their success.
The fundamentals of business development, operations, and supply chain are essential elements of a successful franchise guide. The operations manual should also give franchisees key performance indicators (KPIs) to monitor their progress, determine if they are on track or off track, and establish ways to achieve success.
Publish Your Labels With the USPTO
The USPTO (United States Patent and Trademark Office) registers your business’s trademark, company name, and logo that make up your brand. With the correct USPTO registration, you safeguard your trademarks across the country.
Publishing your labels will safeguard your company’s trademark rights nationally, prohibiting rivals from utilizing them in the future in an unfriendly, similar manner. Franchisees must continuously monitor their trademarks and watch out for unauthorized usage, notwithstanding these protections.
Sign Up and Submit Your FDD
Most states require an FDD to operate a franchise, and some need you to register your FDD. You must apply to the state and pay a refundable filing fee to register the FDD. You will receive your filing fee if the state denies your application.
You should safely preserve your FDD after completion to retrieve it and make updates when needed.
Establish a Budget
When you’ve done creating and completing your legal documentation as a new franchisor, you’ll need to set a budget and create a sales plan for franchises to be sold to qualified and adequately capitalized franchisees.
A budget is a fundamental tool for developing and improving sales strategies. It sets the stage for setting realistic and achievable goals to be achieved.
When planning your budget, consider the expenses related to developing your franchise brand narrative, your franchise sales targets, franchise PR that will confirm your brand story, and franchise training and support.
Your costs will directly depend on whether your brand has an organic following among consumers who are aware of your business and might be interested in purchasing a franchise.
Develop Your Franchise Sales Strategy
Your sales strategy is a systematic, predictable plan describing how you will reach your goals. It will involve setting sales targets and determining how you will meet those goals. To develop your strategy, you can use market data such as franchise trends, statistics, market segmentation, and the franchise business model to create a detailed action plan.
Develop a sales strategy using resources such as marketing websites, job boards, weekend flash sales, and in-person promotions. You must work with your sales consultant to fine-tune any weak points in your marketing plan and learn how to integrate them into a more effective strategy to generate more revenue.
The strategy should include identifying a niche in the franchise industry where you can find success and a high rate of return by researching franchises that have already been successful in the same industry.
Use a marketing strategy that meets your goals and ensures the success of your franchise business. Identifying your target customers and researching similar franchises can help you identify the key factors influencing buyer decision-making and behavior.
A business-to-business marketing strategy is an effective way to target potential buyers. The approach enables you to build relationships with prospects, which drives them to become potential clients interested in purchasing a franchise from your business.
Establish Your Franchise Business
After getting feedback from the FDD and creating a sales strategy, you can establish a franchise business. The establishment will be your operational hub for launching and supporting new franchisees. Remember that you need a proper business structure to run the franchise network.
You must also define your legal status, open bank accounts and establish credit lines, and set up accounting systems to properly manage your franchising business. Use a corporation setup that will increase flexibility in managing multiple locations and hiring employees.
While establishing your franchise business, separating your current business activities from the new network and brand is essential. You can use a different vendor and supplier base for your outlets and an independent IT network for operating them.
You may also establish a separate office away from your primary headquarters to house the new franchise business.
Now you have all the steps on how to franchise a business. Creating a franchise business is a long and detailed process. You will need to spend vast amounts of time creating your legal documentation and strategy before bringing it to the market.
The ultimate goal of a franchising business is to see franchisees succeed not just financially but also in terms of brand recognition and their ability to continue contributing to the parent brand’s success.