Being a business owner is one of the most exciting journeys to be on, and when you start to think about expanding, things can get even more thrilling There are so many ways to expand your business, but one potential option is to franchise, particularly if your brand is easily replicated and your services would be useful or beneficial to clients in other locations. From an owner’s standpoint, starting the process to franchise your business comes down to a few simple steps.
First, strongly consider seeking legal guidance. As with any business move, there are extensive legal forms, documents, and proceedings to guide this process. A franchise lawyer can help you with those documents, work through your property protection, and have the tough discussions with you throughout the development life cycle.
Once you’ve hired legal help, it’s time to get started. As the owner of a potential franchise, you need to start thinking through how exactly your business runs. This is important because eventually you’ll develop a training program for future franchisees and you’ll also develop an operations manual. Being able to replicate your business is a key part of franchising. These processes will help control the development of each of the franchises moving forward and help serve as a method of quality control for each location as well. You may even find better ways to run your own business as you develop your business guide – an added bonus!
Keep in mind a franchise manual is a massive document and undertaking to write. I encourage you to consider working with a franchise consultant to help complete this document, as they are trained in the requirements of the manual. A trained consultant can help you create a useful, structured document that will be essential for your franchisees to review and have on hand – which will be full of practical knowledge for both you and the franchisee.
While developing your guides and manuals, and unless subject to an exemption, you will also need to fill out a Franchise Disclosure Document (FDD). This document outlines everything a potential franchisee would want to know about your business. Your legal advisor can and should assist you with this document, as it has a very specific format. FDDs have more than just a few notes about what your business is about. A complete FDD will have, for example bank statements, copies of contracts, documentation regarding any initial setup fees and investment requirements. Beyond the mathematics of franchising, a Franchise Disclosure Document will also include information on expectations for the franchisee and any limitations on what can be sold as part of the franchise. The FDD will be read by every potential franchisee and will likely be a major part of their decision in applying to run one of your franchises. It should outline your financials, growth plan, and important business information. And just as a reminder -this document will be reviewed and updated every year. Also keep in mind having a franchise consultant review your FDD every year is a great way to make sure you’re staying current and have the proper documentation for further growth.
Once you complete your legal documentation, it’s time to consider where to franchise. In some states, registering your franchise is an extra step needed to offer to sell franchises there. Registering your business in another state will depend on what the state’s rules are but generally requires you to complete and send paperwork to state examiners to be reviewed. The process can take weeks to months and does require a fee. However, not all states require registration. It is important to think about the kind of product or service you offer and where others might find it useful. Starting within your own state is generally a good place to get the franchising process going. Work with your legal and financial advisors to decide what might make the most sense for you from a legal and financial standpoint to get started.
After the ground work has been laid and you are legally compliant to sell franchises, franchisees will be able to begin applying to own a franchise. During this stage of franchising, take your time and choose carefully: in both owner and location. Each decision you make must be strategic. Think about the business owners you’re offering an agreement to and make sure they’re a good fit for your company and brand. Because you’ve carefully built your brand, you want to protect it every time a decision is made. It’s easy to speed through applications as you begin to franchise, but carefully consider each one. Ask yourself if they are a good fit for the brand and business, have the skill sets to successfully run a business and if their location makes sense for your company. Be picky as you choose – remember what you have built and want to build. Smart decisions will help you achieve those goals.
Found the right franchisee? Then it’s time to get them started! This is the time where their training will begin and their location will start being built. During this process, it is important to provide your franchisee with the support they need to get their franchise started right and to be sure you’re complying with your obligations under your franchise agreement. If you’re able, try to visit the location and be available for any questions. Since this expansion is still part of your business, it’s important to be aware of what’s going on. During this phase of expansion, you’re truly building a community among your franchisees, which can be key to their (and your) success.
Allowing other business owners the chance to run a business can be a rewarding experience with the right foundation. Franchising a business is not an easy process. It requires an extensive amount of legal ground work before your first franchise will ever be sold. Throughout the process, it will also require many hard decisions, but in the end, it can be a critical factor for your business’s growth.