Many startup and small business owners agree that franchising is a tried and tested way to grow. But, a lot of planning and time is necessary to grow your small business into a franchise or chain. Having a national group of franchisees is a goal of many and with the right expansion strategy, and with the right approach it can become reality.
Here is an overview of some key steps you need to take to become a successful franchiser:
Find out if you and your business are ready.
Will your business flourish as a franchise? It’s not enough to have a record number of sales. Your concept has a lot to do with how a franchise will succeed so make sure to consider this well. If it’s appealing to both the customers and prospective franchisees and can succeed without your personal supervision, you’re well on your way.
As much as you need to rely on your gut instinct to succeed in business, you need to go the extra mile and do a lot of market research to see if there’s a significant demand for your business outside your hometown. Being a franchiser is very different from being a small business owner as well. Instead of focusing on selling your pizza or running your lawn care business, you now have to deal with selling your franchise and supporting the franchisees.
Get acquainted with the legal requirements.
Before selling your franchise in the US, you need to register a Franchise Disclosure Document (FDD) with the Federal Trade Commission. You’ll need to provide vital financial information in this document, as well as a manual for franchisees. Other states also have their own regulations before you can sell franchises so make sure to seek legal advice from a franchise consultant first.
Decide on your franchise model.
When you’re preparing the necessary paperwork, you will have to decide how you’ll conduct operations as a franchiser. Your main decisions should cover the following:
- Terms and conditions of your franchise agreement
- Royalty percentages and franchise fees
- Training programs
- Marketing packages
- Size territories awarded to franchisees
- Areas where franchises can be offered
- Net worth and relevant business background that franchisees require
Take note that these decisions can greatly affect your profitability in the future.
Register as a franchiser.
Your next step is to complete and submit the legal paperwork. It’s normal to be asked for more disclosures before approval is given so make sure that you provide all the documents being asked for. It can take several months to get approval; patience is a must!
Sell franchises and support your franchisees.
Finding franchisees and selling your franchise is now your main task. It can be difficult due to the risk involved for potential franchisees, but everything is easier when you have a solid marketing and sales strategy. You need to convince people to invest their time and money in your concept: something that small business owners have little trouble doing due to their passion for their business. Trust is a key point between you and your future franchisees, which is why it’s important to offer quality training programs and ongoing support. This Entrepreneur article expounds on how to turn your startup into a full blown franchise or chain!
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