As a successful entrepreneur, you’ve been there, done that and seen it all. You have done what most haven’t accomplished and that’s not only ensuring your business survives, unlike many other startups, but also seeing it to consistent profitability. At such a time, it may have crossed your mind to franchise your business as you continue scaling up and expanding into new territories.
Franchising is an excellent option because while you’ve laid the groundwork, you don’t have to do it all by yourself. You can rely on your future franchisees to help you expand your business further. However, if this is something you are considering in earnest, then perhaps you might be wondering about the steps involved in the franchising process. We’ve broken them up into three parts. But first, it’s important to get a better understanding of what is a franchise business.
Table of contents:
How a franchise works
A franchise is a business that takes an existing successful model and replicates it in different territories through units which are basically “copy and pasted” to offer the same products or services to a clientele. As a result of giving the franchisees in these territories the rights to use your brand and intellectual property as well as operate under your business name, you as the franchisor, are entitled to royalty payments from such franchisees. This is essentially a brief run down of “what is a franchise?” business definition.
3 Steps to opening a franchise
Once you’ve decided to franchise your business, you need to do some careful analysis of whether this option is suitable for your particular business offering. This is why we’ve broken up the process of how to franchise your business into three easy steps.
Step 1: Research and evaluation
The very first step in franchising your business is to knuckle down and answer some hard questions. Firstly, you will need to do a lot of research into the franchising industry and evaluate whether its operations and processes suit your existing business model. For example, you will need to ask yourself whether your business model can be replicated in other territories and what their chances of success there are or could be.
This will involve serious market research as the “cloning” of your business elsewhere may not see the same levels of success that you’ve seen at your initial location. You will also need to research funding and financing options. Since franchising is not necessarily a cheap endeavour; you will be required to have the funds to pay for legal fees, expansion costs, marketing and advertising to potential franchisees, etc.
On a personal level, you will need to be certain that you’re able to act as a mentor to all the franchisees who come to operate your business units and whether you have the time and personal inclination to do this on an ongoing basis. Remember that a franchisor-franchisee relationship is usually mid- to long-term and you need to be sure that you can be involved over the long haul.
Step 2: Paperwork and legalities
When you’ve identified that franchising is for you, it’s time for the nitty gritty of establishing your business as a franchise. You will require a lot of legal help for this part of the process because you will first need to register your business as a franchise.
In addition to the above, you will need to ensure that you have safeguarded your logos, brands, trademarks and intellectual property so that there is consistency being applied to their usage by your franchisees in the future.
Documents will also need to be prepared. Some of these include the Franchise Agreement, which is signed between you, the franchisor, and the franchisee when they purchase the rights to run your business from a different location. But before this, you will need to prepare the very detailed and also confidential Franchise Disclosure Document that is presented to prospective franchisees when they express an interest in your franchise business.
Step 3: Action plan – marketing and more
When the legal groundwork has been completed, you will need to start acting. Serious efforts will be required on your part to ensure that you attract high quality leads to your newly established franchise business. This will involve highly targeted marketing and advertising actions, which could end up being costly.
You can and should, of course, advertise these franchise opportunities on your existing website, but there are other, more specific approaches to follow that are much more effective. In fact, you may even consider choosing a franchise marketing company’s services specifically for this purpose. This will tie back to the funding you’ve been able to secure for your business discussed in step one above.
Closing remarks
Franchising your business could be the best next step you take on your entrepreneurial journey. It’s an excellent way of scaling your business fast and boosting your profitability. It’s also an extra income earner for you through royalties received from your franchisees, which you can either reinvest back into the business or put to other use.
However, ensuring that the industry and market you’re in affords the opportunity to franchise your business is crucial. As is the fact that you’ll spend a considerable amount of time working out the legal requirements and ensuring you comply with the law. Finally, once all that’s been taken care of, it’s time to look for franchisees. This will mean the need for a creative marketing and advertising plan that’s executed flawlessly to get you the high quality leads you need.
