Are you ready to franchise your business?
According to the 2017 Economic Census*, franchises exist in over 300 industries – from fast-food restaurants to less obvious industries like weight-loss clinics and warehousing. If you have a successful business that can be easily replicated, franchising might be for you. As with every part of owning a business, the devil is in the details, but the payoff can be amazing. To determine if franchising might be in your future, ask yourself the following questions:
Is my business successful?
While there’s no legal requirement that a business be successful to be sold as a franchise, the more locations you’ve established - and the more profitable each location is - the more likely other people will want to buy into your idea. If others have approached you about buying into your business, it’s a great indication that your company is “franchise-able.” Who wants to invest in a business that’s not likely to flourish?
Can my success be duplicated?
The more profitable locations you have, the more likely it is that your business will appeal to potential franchisees. Ideally, your concept should be relatively simple to operate in a variety of markets. In order to show your concept can be successful for others, it’s important to define the “secret sauce” that has made your locations successful, which means documenting everything from how much square footage is required to the number of employees needed prior to opening.
Such detailed documentation can be time consuming and difficult - but necessary. It will require you to be organized and to know your business inside and out. You’ll need to document everything you’ve done on your way to success – this is the beginning of the roadmap franchisees will follow for their own locations, and they’ll expect it to include precise information and best practices. Even if you ultimately decide not to franchise, this is a useful exercise to help your business operate more smoothly.
If you’ve determined your successful business can be duplicated, and you’re serious about selling franchises to others, it’s time to make it legal. One document you’ll become very familiar with is the Franchise Disclosure Document (FDD). You’ll want to hire an experienced franchise attorney to structure your business and the proper documentation – this isn’t the time the skip expert advice.
Sales and Marketing
Now that you’re prepared, it’s time to market your franchise opportunity. This generally starts with a marketing campaign, and involves a step-by-step sales process for interested potential franchisees. Even though it’s exciting to receive an offer, it will pay to be extremely picky when choosing a franchisee. The franchise business is largely about maintaining relationships, and the most successful franchisors are those who are the most committed to making sure their franchisees are successful. You’ll be working closely together, and this person will represent you and your brand. (Which you’re probably hoping to sell to more people.) You’ll want to work with those who are as protective of your brand as you are yourself.
While this is obviously a broad overview of the decision to franchise, it’s a great place to start. Becoming a franchisor is starting a new business - while you’re running your existing business. There are consultants, mentors, and attorneys you can look to along the way. Resources are available from the American Association of Franchisees & Dealers (AFFD), the International Franchise Association (IFA), the Small Business Association (SBA), and your banking partner.
*Conducted by the US Census Bureau
The views, information, or opinions expressed in this article are solely those of the author and do not necessarily represent the views of Citizens State Bank and its affiliates, and Citizens State Bank is not responsible for and does not verify the accuracy of any information contained in this article or items hyperlinked within. This is for informational purposes and is no way intended to provide legal advice.