An Overview of the Franchising Process

Becoming a franchisor requires you to engage in a different set of management activities than you’ve been accustomed to as a business owner. You have to be a salesperson, enticing other entrepreneurs to invest in your franchise system. You’ll need to support your franchisees and help them become successful.

 

To navigate the US federal and state franchising regulations, you'll need legal assistance  as  well  as consultants. Preparing documents, marketing materials, advertising, and training programs will require an  initial investment.  Run some numbers to ensure that your franchises will produce enough profits to make the investment in and management of the franchise system worthwhile.

 

Here are a few of the next steps in the process of becoming a franchisor.

 

Design Your Franchise Model

While a franchise attorney will prepare the required legal documents, you need to make decisions about how your franchise system will operate. Key points to consider include:

 

• Franchise fee and annual royalty percentage

• Your franchise agreement term and renewal conditions

• The geographic areas you will go into and the specific territory rights for each franchisee

• The amount of start-up and ongoing training you will provide

• Whether franchisees must buy products or equipment from your company

• The qualifications, experience, and financial standing you want in a franchisee

• How the franchises will be marketed

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These factors all affect your long-term profit potential, so take the time to get everything right. The difference between a five percent and a six percent royalty may not seem like much at the outset. But over time and with multiple franchises bringing in revenue, a one percent lower royalty could mean several less zeroes at the end of the numbers on your royalty checks.

 

Submit Your Legal Documents and Register as a Franchisor

Once you have your franchise agreement and franchise disclosure document buttoned up, you need to submit the paperwork to the Federal Trade Commission. At this point, you may immediately start selling in any of the states that do not require registration or notice. If you are going to do business in one of the 15 states that require registration (including New York and California) , you’ll need to file under the states’ statutes. It can sometimes take several months to get comments on and approval for your state franchise registration. 

 

Hire Franchise Management Staff

It takes time and effort to market and sell your franchises.  You will likely need a trainer, a marketing or salesperson or consultant who can ; interface with franchisees and answer questions. You'll also require  marketing and advertising services. If your franchisees will be buying supplies from your company, the logistics will have to be planned.  

 

Staffing will also be required to support your franchise network efficiently. This is particularly true for training, as inadequate training and preparation can leave your franchisees unable to implement your system successfully.

 

Sell Your Franchises

All the brilliant systems in the world won’t do you any good if you can’t convince entrepreneurs to invest in your franchises and then operate them profitably. Prospective franchisees will be putting up a significant amount of capital and investing their time to buy your concept. It may be one of the biggest decisions they make in their life. You’re asking a person to spend tens of thousands of dollars, and countless hours to go into a business they’ve never been in before and run it according to your rules. You will need to tell a compelling story and back it up with hard numbers to show why your business is worth that kind of trust.

 

Provide Support to Your Franchisees

To be a successful franchisor, you need successful franchisees. This is accomplished  through comprehensive training and ongoing marketing support.

 

Initial start-up training is best performed in person at your "show" or company owned facility. Some ongoing training can be provided online through webinars and static learning modules. Often, phone calls are all that’s needed to answer questions and clear up minor issues. Comprehensive training and testing will create and maintain a high level of quality control and ensure a uniform experience for customers no matter which franchise outlet they visit.

 

Marketing and advertising your growing chain is necessary to drive customers to franchise locations. This encompasses everything from radio, print, and online ads, to uniforms, logos, fliers, and in-store promotions. Advertising is a requirement for long-term success.