5 Things You Must Know About Franchising That You Won’t Find Online

5 Things You Must Know About Franchising That You Won't Find Online

If you’re a business owner with an eye on franchising, you have most likely begun your due diligence online.

The ins and outs of franchising your business may seem slightly overwhelming. However, with a few key aspects under your entrepreneurial belt, you can easily go from business owner to franchisor.

Not only will you need to franchise your business, but you will also need to connect with other like-minded people to be your franchisees. If your business is booming, franchisees will flock.

“The benefit of a franchise is really to buy something that’s been proven over a period of time,” Sean Kelly, publisher of UnhappyFranchisee.com told Forbes. “Hopefully something that’s been proven over different economic climates. So it’s done well in good times and in bad.”

What is the state of franchises?

Is making the switch from business owner to franchisor worth it? Well, in 2015, the number of franchises reached nearly 782,000, an all-time high in over seven years.

 the number of franchises reached nearly 782,000, an all-time high in over seven years.

In the same year, Franchise Direct research found that the gross takeaway for franchisees was estimated at $889 billion.

Franchise Direct research found that the gross takeaway for franchisees was estimated at $889 billion.

There is definitely profit to be made with a successful franchise. Your online research has probably uncovered a variety of data and statistics, and it’s essential to get an absolute picture prior to franchising your restaurant, fitness club, coffee house, or even food truck.  

The following franchising tips will help you make a more informed decision, going from locally grown to a national powerhouse.

1. Hire a Franchise Attorney.

You would be surprised how many business owners overlook this very vital step before franchising.

Franchise lawyers are vital to your franchise’s growth and success. They will ensure all legalities are taken care of while also keeping you from potential liabilities down the road.

When it comes to franchising, it can save you a nightmare down the road. You need to remember that making your business a franchise is a lot of work. You can’t do it all, and sometimes a little legal help will go a long way.

“You need to do everything in your power to protect yourself legally, and there’s only one way to do it: You need to hire a franchise attorney,” Joel Libava of Entrepreneur said.

Before franchising, talk these details over with your lawyer:

  • Qualifying process for future franchisees
  • Setting franchisee locations and territories
  • Franchisee costs and fees and payment schedules
  • The length of franchisee agreements and your rights to terminate them
  • The franchisor training and support you will offer
  • Operational guidelines for future franchisees
  • Copyrights associated with your new franchise
  • Local, state, and federal laws for franchising

If you don’t have the funds to hire an attorney, consider looking for financing that can help you get through this initial phase.  Once the investment is made, and you have franchisees on board, you can quickly and easily recoup the costs.

2. Sharing Your Business.

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If you want to have total control and oversight, you should do quite a bit more research about franchising. Even though you are the business brain behind your success, you will need to share that success with your franchisees.

The very nature of franchising revolves around uniformity and structure when it comes to letting franchisees take claim to your business name. However, there is a slight lack of control as well. In order for your franchisees to be successful, they will need to do what’s best in their local market.

This lack of control of your business may be daunting, but if you want to make your business a household name, it is necessary.

Your franchisees will still need to uphold your goals and mission as a franchise, but giving them room to grow on their own will benefit both franchisee and you, the franchisor.

3. Entrepreneur vs. Business Owner.

The control the franchisor has over franchisees may make you more of an entrepreneur, rather than a business owner. If you are thinking about franchising, it is essential to decide what your long-term personal and professional goals are.

“Among those of us with small businesses, there’s confusion between the terms Small-Business Owner and Entrepreneur,” Melanie Spring explained in an Entrepreneur guest post. “Both can have small businesses, but they have different styles of leadership and thoughts on running their business.”

Think about what kind of entrepreneur or business owner you want to be. If giving up a little control by franchising seems frightening, maybe gather some more information about the success franchisors have within their first five or ten years. This can paint a clearer picture about the ROI you can expect to see by franchising.

4. Should You Franchise or Open Another Location?

Your business idea has paid off and now it is time to think about a second, third, or fourth location. If you have a successful business and are thinking about franchising, there are a few facts to consider.

Some business owners will hold off on franchising due to other opportunities that are pressing. For example, you may have found another great location for your business to take root. Or you may find that opening a new location is easier than the overall franchising process.

Whatever the case, the dilemmas often come down to what your future goals are.

You want to ensure you are pursuing the best growth strategy for your business. It may be time to franchise, but a new location will net a better ROI, or vice versa.

Franchising could turn out to be the best course of action if you want to hand over the reins of a new location to someone else, letting them take on the opening costs and management responsibilities.

“If the first unit isn’t providing adequate returns to move ahead with franchising, a company shouldn’t use it as the model for franchise operations and must refine it first,” Mark Seibert of Entrepreneur explained. “But when looking at the question objectively, if franchising is your chosen expansion strategy, starting sooner will often have incremental long-term benefits.”

5. Using Franchise Brokers.

Franchise brokers can have value when you are looking to make your business a household name. They essentially take much of the legwork out of finding franchisees, developing pre-qualified leads and following up to get agreements signed.

One of the biggest advantages of using a franchise broker is their payment structure. As in, it is performance-based, so if your franchise broker doesn’t perform, there is no investment to lose. They actually don’t get paid until you receive the franchisee fee per the contract.

This makes franchise brokers cost effective. However, there are some disadvantages to using a franchise broker you should be fully aware of. Franchise brokers often operate without any oversight. They are not connected to you or your franchise in any way, shape, or form.

A franchise broker does represent your franchise, but without legal connection, they can put you at risk for liability issues.

Franchise ill and fraud are problems that can occur when dealing with a franchise broker as well.

To avoid these issues after franchising, you should keep the conversation ongoing with your franchise broker. Collaborate as often as possible. You can even set up training and feedback sessions to ensure the broker has a full understanding of your goals and mission as a franchisor.

From legal dealings to brokers, the potential benefits of franchising your business can seem clouded by pitfalls. But remember, you are a savvy business owner who has already had success. You built something you’re passionate about from one innovative idea. Make the most of your franchising efforts and reach the growth and success you envision for your business.

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Nick Rojas combines 20 years of experience working with and consulting for small to medium business and a passion for journalism to help readers grow. He writes about technology, marketing, and social media for the aspiring entrepreneur. When Nick is not sharing his expertise, he can be found spending time at the beach with his dog Presto.

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