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What Do You Need to Franchise a Business?

May 21, 2019
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It can be difficult for a new business to expand, particularly in an industry or a market where there is a great deal of competition. Not all businesses need to expand, of course. Some small business owners may be content to keep their business small, take in the income that is already coming in, and call it a living. Other business owners, however, want to aim for the stars and dream of having their brand known far and wide. They dream of seeing their brand across the nation. Expanding a brand can be costly and risky, however, and many smaller business owners have failed trying it, either because their product or brand wasn't suitable for franchising or because they rushed the expansion. Here are a few tips about what you need to franchise a business.

Why Franchise Your Business in the First Place?

Maybe you're wondering why you would even want to franchise your business. Why not just open up new stores as your profit margins allow? A franchisor gets money for the initial sale of the franchise, money for the right to license the brand name, and a royalty, but why not open new stores outside of the franchise model and take all of the money for yourself rather than share it with a franchisee? The answer is simple. Capital. It's expensive to open a new store, but in the franchise model, the franchisee is basically financing the cost of opening a new store. Franchising is an alternative form of capital acquisition that really does bring with it some advantages. The most important, of course, is the opportunity to expand without risking debt or the cost of equity. The franchisee is using other peoples' money to take their brand to another level.

Another important reason franchising your business might be a good idea is staffing. When you expand your brand and start bringing in new stores, you are constantly hiring the staff necessary to keeping the company-owned business going. Turnover in staff can be costly and time consuming. When you franchise, it becomes the franchisee's job to bring in the necessary staff. After the initial training a company provides to the franchisee, the franchisee keeps the business staffed. Someone who is purchasing a franchise will be motivated to find the best staff possible. Managers of company-owned stores aren't motivated because they don't have a real stake in what's going on, outside of a paycheck, whereas the franchisee is invested in the brand and will work hard to make it a success. With a stake in the success of the brand, franchisees are typically more likely to better manage the expenses, the reputation, and the overall performance of the franchise.

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All of this leads to faster company growth, better management of the brand, and increased profits all the way around. Because franchisors expect their franchisees to handle a large portion of the operation, from selecting location (sometimes) negotiating the lease, some of the marketing (particularly local), hiring and training, all of the business stuff (accounting, payroll, and human resource), the franchisor's structure is more streamlined. This leads to a situation that makes it easier for the franchisor to increase its profit margins through franchising.

What Do You Need to franchise a Business?

So you've decided that franchising your business is a great way to grow with less risk and less in a less costly manner. How do you get started? First, do some research. Is your business one that has a nationwide appeal? Can your business be consistently set up across the U.S. or throughout the world with the same public appeal it has at its home location? Not all businesses lend themselves to a franchise model. Speak with business professionals if you are lacking in that area and spend time doing some serious market research. A franchise model can be ideal if your business has universal appeal, but it can be a flop if it doesn't.

Legal advice is important. You need to hire a lawyer if you don't already have one. Not only will the lawyer help you draft the documents you'll need as a franchisee, you will have to fill out a Franchise Disclosure Document. You're going to need to come up with the pricing structure, franchise agreements, and paperwork pertaining to intellectual property agreements and usage. All of these legalities will absolutely require a lawyer.

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Speaking of intellectual property, if you are a small business that hasn't bothered with trademarks (business methods, product functionality, etc.) and copyrights (logos, slogans, etc.), associated with your business, you want to ensure these elements of the business are fully registered and protected before you launch a franchise. A lawyer with business background can be particularly helpful in this regard. This is known as protecting your brand, and along with the guidelines you have in place for your franchisees once you've established a franchise structure, this is one of the most important ways to grow and protect your brand reputation.

Another important element is your growth path. Work with business professionals and lawyers to help you determine how you want to expand, where you want your businesses to be, and how you're going to get there. Franchising can mean faster growth, so be prepared for it by understanding the direction you want your business to go and committing your time and resources to that particular focus.

All USA Franchises is a great place to start. All USA Franchises brings together franchisees, franchisors, investors, and entrepreneurs in a single place. Our goal at All USA Franchises is to list all of the more than 3000 franchise opportunities in the United States. We never charge a fee for this, which means everybody gets a fair opportunity to meet one another. All USA Franchises is the absolute best place to list your franchise for sale or find a franchise for sale. Since there are no fees, all franchise opportunities are available to all potential franchisors and investors, not just the franchises that pay for premium views. Whether you want to put your franchise up for sale, you're looking for investors in your franchise, or potential franchisees, All USA Franchises is the best resource anywhere. List your franchise by industry or by investment and find the right franchisees for your new franchise opportunity.

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