"But five years later, when you have 100 franchises sold, and they each make $700,000 a year, that's a $7 million annual mistake. The business model should be presented to the potential franchisees. Franchising your business allows you to have customers all around the world. Once the prospect has been identified, the franchisor will also require marketing tools to assist it in the sale of franchises. A good example is Florida-based Pizza Fusion which offers a familiar product--pizza--but with all-organic ingredients, delivered in hybrid-electric cars. At the same time, you'll need to start marketing the growing chain to drive sales to franchisees. In order to legally sell franchises anywhere in the United States, your business must complete and successfully register a Franchise Disclosure Document with the Federal Trade Commission . "It took longer than we thought, and was very intense in terms of all the things you have to cover," she says. You'll need to establish a pretty high level of trust.". The initial investment is a once-off fee. The company has also entered into a partnership with the national franchise-consulting chain FranNet, whose consultants may present the company to their prospects. If you and your concept are quality candidates for franchising, we’ll work to uncover and discover that truth. To be legally entitled to sell franchises, the franchisor will need guiance on developing a franchise agreement and a FDD (Franchise Disclosure Document), and will need to file with appropriate state authorities on a national basis (23 states have such requirements). If you’re concerned about doing it right and avoiding missteps, you’re not alone – we’re here to help. "Can you clone it? You will make money from an initial fee (franchise … In the case of Solar Universe, the company sells its franchisees the solar panels they use, so founder Bono says he needed a full-time hire to staff the order desk. For aggressive sales campaigns, the iFranchise Group would recommend the development of a mini-brochure (for use in direct mail campaigns and perhaps as a give-away at trade shows), a full-size franchise sales brochure, and a franchise sales video. The first thing you should know is that there is always an upfront franchise fee, and franchisors often have financial requirements for whom they’ll allow to open one of their franchises. "Trust that you're going to need a lot of money for marketing," he says. FRANCHISE MARKETING PLANS. Request a free video on how to franchise your business, and we'll have the right franchise consultant contact you. The tools necessary for franchising a business can be developed in approximately three months from the completion of the implementation plan, although state registrations may delay a company’s ability to sell in certain states for another three to four months. Cleveland-based franchise consultant Joel Libava says he likes to see companies with at least a couple of profitable units beyond the first one already in operation before a company tries franchising. Legal safeguards are in place to maintain brand control, consistency and protection. But becoming a franchisor is not an automatic ticket to success, especially in this challenging economy. Another benefit of getting a franchise is usually the company provides franchisees with the equipment and the products needed to … Call us today at 708-957-2300 to see how we can help franchise your business. If we can be of assistance, please contact us: [email protected] | (708) 957-2300. When you submit it, be prepared for authorities to critique the document and possibly demand additional disclosures before they approve your application. This will require a specific marketing plan designed to get the franchisor’s message to the targeted franchise prospect. Be careful to note whether geographic variables such as weather or local laws may affect franchisees' success. While becoming a franchisor can require considerable expense, the capital required to grow a network of franchised locations is far less for you than achieving the same number of company-owned locations. The first step in franchising a business is preparing a business plan that will consider the structure of the franchise, the profile of the franchisees and the territories that can be allocated to franchisees. The franchisor is the business whose sells the right to another business to operate a franchise – they may run a number of their own businesses, but also may want to let others run the business in other parts of the country. As you prepare to become a franchisor, you'll usually need to add several staff members who will focus solely on helping franchisees. Territory size is important too, as too-large territories may have to be bought back later at a premium so they can be split up, notes IFA's Shay. It also can cost $100,000 or more, so ask yourself if your company has the financial resources. If you’re running a successful small business and have ambitions to grow, you have several options. - Michael Messer, Marketing Manager, Bridgestone/Firestone, Franchise Operations Manuals and Training Programs, Franchising or Expanding a Dealer Program, Read more on the importance of having outside independent franchise legal counsel, Election Results Positive For Franchising, What Restaurant Franchising Will Look Like in the Coming Year, How to Grow Your Business Through Franchising: The Franchise Freedom Podcast, About the Author: Mark Siebert, iFranchise Group CEO & Senior Franchise Consultant, iFranchise Group Receives Top Franchise Advisor Ranking Again - September 2020, Experts in Franchising Industry Predict Huge Rebound in Restaurant Franchise Sales - July 2020, Franchise Expert Predicts Dramatic Rise in Franchise Sales Following Pandemic Shutdowns - June 2020, iFranchise Group Ranked Top Franchise Advisors by Entrepreneur Magazine - September 2019, Franchise Experts Support Current Joint Employment Initiatives - December 2018, Great American Franchise Expos - biweekly July-December, 2020, IFA Annual Convention - February 16-18 & 23-25, 2021 (Virtual Event), International Franchise Expo, New York - June 17-19, 2021, Franchise Expo West, Phoenix - September 30 - October 2, 2021. Franchising your business will require a certain level of investment. You'll primarily be selling franchises and supporting franchisees now, instead of selling pizza or fixing toilets. UNC Press Books, 1992. International Franchise Association. As we navigate these challenging times, our thoughts are with our clients, colleagues and coworkers, and with the business and franchise communities as a whole. The tools necessary for franchising a business can be developed in approximately three months from the completion of the implementation plan, although state registrations may delay a company’s ability to sell in certain states for another three to four months. And you've signed a 10-year contract.". For example, a Cafe Yumm franchisee must have a net worth of 500,000 dolla… Similarly, if you're planning to expand your business, a well-managed franchising … This will assist them to build the successful business. To begin franchising, your business has to have a successful, proof of concept. Marketing encompasses everything from radio or print ads to uniforms, logos, fliers, and logo art on company vans. Small Business Obtaining Financing Entrepreneurship 101 … I understand that the data I am submitting will be used to provide me with the above-described products and/or services and communications in connection therewith. Franchise a Business The franchise industry presents many diverse investment opportunities for people looking to go into business for themselves but not by themselves. Here's our guide to the important steps you'll need to take along the road to becoming a new franchisor. If you want to sell in one of these states, you'll need to meet their requirements as well, at additional cost. You (the franchisee) can sell their products and/or services for a specified period in return for payment to the franchisor. The founding sisters still do all the buying for the growing chain, but Deuser says growth means they are already looking into hiring a second trainer. The cost of a well-designed program varies substantially, depending on the strategy chosen and the desired speed of expansion. Franchising: A Path to Your Future People go into business by way of two paths. Depending on your situation slower growth, finding debt financing or taking on partners are all alternatives that may prove better ways to move forward. Read more on the importance of having outside independent franchise legal counsel). Does it provide good returns? In the FDD, you'll be asked to provide a wide range of information about your business, including audited financial statements, an operating manual for franchisees, and descriptions of the management team's business experience. Franchises are an extremely common way of doing business. To opt-out contact us at [email protected] or (708) 957-2300, or click here. he says. Additionally, the business needs to be something you can systematize and replicate, not something that needs your personal touch to be successful. LEGAL DOCUMENTS. Most successful franchises take a business that's already profitable and try to replicate that success in other locales. If assistance is needed to view any content on our website, please contact us directly. Your salespeople should know your business well and be able to tell a compelling story about why you're a worth the investment of their time and money. And of course, the franchisor will need to understand the nuances of the sales process and the legal constraints of franchise sales. Continuing his latest series, Grid Law founder David Walker explains every aspect of the franchising process for small business owners looking to franchise their company. The concept has to appeal both to end consumers and to prospective franchisees. Franchise Your Business in 7 Steps; Step One: Step One: Evaluate if Your Business is Ready; Step Two: Learn the Legal Requirements; Step Three: Make Important Decisions About Your Model Find an expert who can make sure you're doing every required step correctly. The first question to ask is whether your business is suited to being franchised. Your training programs and other support efforts will create quality control, notes Siebert, making sure the brand provides a uniform experience no matter which unit customers visit. The main differences between licensing and franchising are that with a licensing agreement you have a lot more control over how your business operates, looks, and feels. 1. You might be considering franchising as a result of your own research into expansion options for your business, or (as is often the case) you might be considering franchising because you have been approached by others who are interested in buying a franchise of your business. Bono reports Solar Universe waited several months to receive comments back from the state of California on its filing, and it took four months in all to get approved there. Go over your personal finances and assets so you can start looking for opportunities in line with your price range. Starting Your Business. Franchise Update Media has its finger on the pulse of franchising with unrivalled audience intelligence and market driven data. If you’re reading this article, you’re probably considering franchising as a method of expansion for your business. Without ongoing training, it's pretty easy to institutionalize wrong behaviors.". Remember that while franchising allows you to grow fast, it also means giving up most of the franchise units' future profits, Shay says. If you're considering franchising your business, know that the process of becoming a franchisor is usually long and involves considerable cost. The franchisor should also develop training programs for use in conjunction with the operations manual. If you have a small business that can be easily replicated, then franchising may be one of the best ways to expand it at a fast pace. The first step in determining whether or how to franchise a business involves two key questions: 1. NEVER let anyone talk you into franchising a business. Call or send an email for details. Franchising your business just like every other strategy or plan in business has brighter sides as well as darker sides. View a full list of franchise consulting services we offer, or contact us to learn more. Key points include: New franchisors don't realize how much each of these decisions can affect their future profitability, says Siebert. Inadequate training can leave your franchisees ill-equipped to implement your system successfully. Franchising your business can be a very successful method for expansion if you take your time and do it properly. Home » Franchise Your Business » How to Franchise a Business, The Services and Process of Franchising a Business for Start Up Franchisors. Then, quit your job, give up your security and benefits, and go into a business you've never been in before. With the Internet, this has increasingly come to mean providing ongoing online learning modules for franchisees to use. In the case of San Francisco Bay-area solar-panel installation franchisor Solar Universe, the company is selling franchises in concentric circles moving outward from its headquarters, mostly in warm-weather states with high electricity costs and generous state green-energy rebates, says founder Joe Bono, 36. Just because your five-month-old Mexican restaurant is selling out every night doesn’t mean it’s time to think about franchising. "Ask yourself if you're comfortable having a role as a teacher and salesperson, selling and supporting franchisees," Siebert says, "as opposed to going out there and doing it yourself.". Franchisor Cindy Deuser, 51, co-founder of five-year-old franchisor Lillians Shoppes, says the rule binder her home state of Minnesota provided was two inches thick. California and Illinois are generally regarded as having the most daunting registration process, says Libava. The Balance Small Business Menu Go. Computer-based tools and programs are highly effective, as are training videos, and can be used for the franchisee, for the franchisee’s employees, and for corporate employees. Once you've made the important decisions that shape how your franchise will operate, you're ready to complete your legal paperwork. Beyond the federal FDD requirements, some states have their own rules for selling franchises within their borders. Franchising a business takes time and some initial investment. To ensure successful franchisees and maintain quality control, the franchisor will need to develop a state-of-the-art operations manual for its franchisees. Franchising allows a business to operate under the established brand of another business. The arrangement is spelled out in a set of documents that define the relationship between both you and the franchisee. Remembering, of course, that franchising is about replicating your business over and over again. Data from the International Franchise Association shows that of the 105 companies that started selling franchises in 2008, more than 40 had not reported the sale of their first unit by the end of 2009. Own Your Own Business If you are a self-motivated individual who is ready […] If not, give our input some … When the right concept is franchised effectively, it can be a great expansion strategy that doesn't require as much up-front capital as growing through company-owned units. Libava asks. 2. At Solar Universe, Bono says they've hired two in-house salespeople to handle franchise marketing. Your sales are boosted more than you can even imagine. Franchisees are motivated to work hard because they have made an investment and have a stake in their business’ profits. The advantages of franchising a business are numerous. There should be an expectation that more units will create economies of scale and increase profits. Siebert boils down the issue this way: "You're saying, 'I want you to give me all your money. "Is it just one great restaurant and mama's wonderful pizza sauce?" The iFranchise Group provides all of the franchise consulting services listed below, and can customize a program to meet your specific needs and budget. In addition, franchising your business will require that you relinquish some of the control you've had over how your concept is executed. Whereas starting a business often comes with a lot of unknowns, a franchise is proof of a successful model already in motion. The franchisor will also need to maintain ongoing compliance (keeping registrations in force while actively selling) and will need to be able to document compliance with state and federal law on an ongoing basis. Franchising is a more risk-free business endeavor for newbie entrepreneurs because they don’t need to build a brand and an audience. It’s not something that can be done overnight or in a few weeks. "If you're a restaurant operator and employ 20 people in a unit," he notes, "you have thousands of new employees going through the system every year. As well as preparing your business for franchising, you need to prepare yourself. And follow my rules.' Solar Universe has sold 14 territories since qualifying as a franchisor in January 2008. Yeah, you need to be careful about them but work hard for the brighter sides. Allow at least 6 months and an initial investment of between $25,000 and $35,000. Is this business franchisable? That doesn’t mean that buying a … As a franchisor, you'll have gone through a lot to reach this point. "Franchisees won't do it exactly the way you would, even if they do it well," says IFA president Matthew Shay. Put another way, franchising a business is simply a method for growing a particular business or brand. Gather market research to confirm there is widespread consumer demand beyond your home city for what your franchise business would offer, and room in the marketplace for a new competitor. Lillians now has a full-time staff of seven. Now that you're in business as a franchisor, one of your most pressing activities will be to find franchisees and convince them to buy your concept. Selling franchises is difficult because of the high risk involved for franchisees, notes Siebert. Find out why franchising may be the right path for you. An efficient business model blamed by some for low wages, franchising squeezes small-business owners between corporations and workers. “You need to have everything figured out,” he says. Becoming a successful new franchisor entails making many thoughtful decisions early on that will affect your business for years to come. Before you plunge into franchising, you may want to consider other options, Siebert says. "Or did you keep growing?". Most good franchise concepts, he says, offer something familiar, but with some unique twist to it. Franchising Definition: The term ‘franchise‘ is understood as an exclusive right conferred by the parent organisation to an individual or enterprise to use the former’s successful business model, in stipulated areas.Franchising is a business relationship; wherein the owner authorises another party to use their brand, product, business system and process in return for adequate consideration. This manual will serve as a sales tool demonstrating franchisor competence to new prospects, as a training guide for new franchisees, as a reference guide for established franchisees, as a “liability limiter” for the franchisor, and as a legally binding quality control device for the entire chain. Protect yourself, your money and your future. While the FTC essentially just files your FDD away, you'll need to wait state approval. FRANCHISE MARKETING TOOLS. FRANCHISE OPERATIONS MANUALS & TRAINING PROGRAMS. These questions can only be answered after evaluating your business and determining how franchising fits with your specific goals and objectives. To help stimulate interest, the company offers a $1,000 referral fee to anyone who sends the company a new franchisee. "If you're thinking either 5 percent or 6 percent royalty, for instance, the difference doesn't sound big," he notes. A franchise (or franchising) is a method of distributing products or services involving a franchisor, who establishes the brand’s trademark or trade name and a business system, and a franchisee, who pays a royalty and often an initial fee for the right to do business under the franchisor's name and system. As you prepare your legal paperwork, you'll need to make many decisions about how you'll operate as a franchisor. Voted #1 Franchise Consulting Firm by 700+ Franchisors. © Copyright 2004-2020, The iFranchise Group Inc. All Rights Reserved. FRANCHISE SALES TRAINING. "If you are so married to your concept that you won't let anyone else touch it, then franchising may not be right for you.". Franchising arises when a franchisor grants a licence (franchise) to another business (franchisee) to allow it trade using the brand / business format. 4: Franchising too soon. If you’re interested in franchising your business, you’re in the right place This guide will provide you with a detailed understanding of franchising, get you on the right track, and help you franchise the right way. You can name yourself what you want, within reason, design your storefront how you want, and so on. Lillians' Deuser says she and her sister/partner Sue Olmscheid, 45, ran many business-model scenarios with their franchise attorney before settling on their $25,000 franchise fee, 7-1/2 percent royalty and 10-year contract term. Step One: Step One: Evaluate if Your Business is Ready, Step Three: Make Important Decisions About Your Model, Step Four: Create Needed Paperwork and Register as a Franchisor, The size territory you will award each franchisee, What geographic area you are willing to offer, The type and length of training program you will offer, Whether franchisees must buy products or equipment from your company, Whether you want an owner-operator for each unit or area/master franchisees who will develop multiple units. Making it so that someone (a franchisee), who is interested in operating your same business in their own market, can do so. Franchise is directly involved on a “take-charge” basis, your business can be franchised in as little as 60-days. Lillians is unusual in that the company has sold all its franchises by word of mouth and doesn't have a sales representative. Franchising your business allows you to have independence from the day to day running of your business, and focus on the bigger picture, while supporting and collaborating with your network of franchisees to create a successful and valuable business. For its part, Lillians Shoppes hired a trainer, a creative director, a marketing assistant and a franchise-process manager who helped get franchisees using company software and systems, says CEO Deuser. A franchise business is a business in which the owners, or “franchisors”, sell the rights to their business logo, name, and model to third party retail outlets, owned by independent, third party operators, called “franchisees”. Don't rely on your gut feeling that your business would be a smash hit across the country. iFranchise Group is continually working to improve website accessibility. You can choose to go it alone, or with the support of a results-driven business model. "Franchising in America: The Development of a Business Method, 1840-1980," Page 119. Solar Universe spent nearly $1 million preparing to franchise, Bono says, including $150,000 to create a state-of-the-art training center for franchisees complete with indoor roofs where they can practice installations. Copyright © 2020 Entrepreneur Media, Inc. All rights reserved. How Long Will It Really Take? Is franchising the right strategy? In January, for instance, three established franchisors filed for bankruptcy protection: Taco Del Mar Franchising Corp., Uno Restaurant Holdings Corp., and Daphne's Greek Café. FRANCHISE A BUSINESS IN AS LITTLE AS 60-DAYS Under a proprietary, fast-track timeline, where Mr. Altogether, a new franchisor can anticipate that the franchise program should take between six months and a year to fully implement. Only looking the darker side will affect your success. Other common sales techniques include attending franchise fairs or hiring independent franchise marketing firms to help locate investors.
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