how to implement a franchise concept

As you franchise your business, follow these strategies to help you succeed:

1. Set Realistic Goals. Franchising is more of a marathon than a sprint. ...
2. Research Your Competitors. You need to competitively position your franchise offering among your competitors. ...
3. Develop Your Franchise Offering for Both Individual and Multi-Unit Sales. ...
4. Make Sure Your FDD Is Compliant for Every State. ...
5. Learn Franchising and Get Involved in the Franchise Community. ...

Full Answer

What is a franchising concept?

Franchising is a form of marketing and distribution in which the owner of a business system (the franchisor) grants to an individual or group of individuals (the franchisee) the right to run a business selling a product or providing a service using the franchisor's business system.

What are the 4 types of franchise arrangement?

Below are four types of agreements franchised businesses commonly form.Single-Unit Franchise Agreement. In a single-unit agreement, the arrangement grants the franchisee the right to open and operate a single franchise unit. ... Multi-Unit Franchise Agreement. ... Area Development Franchise Agreement. ... Master Franchise Agreement.

How do you create a franchise model?

How to Franchise a BusinessMake sure your business is ready to franchise.Protect your business's intellectual property.Prepare a financial disclosure document (FDD)Draft a franchise agreement.Compile an operational manual for franchisees.File or register your FDD.Set a strategy to achieve your sales goals.

How do you structure a franchise?

The following are the steps to franchise your business:Determine if franchising is right for your business.Issue your franchise disclosure document.Prepare your operations manual.Register your trademarks.Establish your franchise company.Register and file your FDD.Create your franchise sales strategy and budget.

What are the 4 types of franchising and give an explanation about it?

Learn the 4 main types of franchise arrangements: single unit, multi unit, area developer and master franchise. The franchising industry is very versatile, with multiple franchises, industry options and investment ranges. In addition, there is a diversity of types of franchise arrangements available.

What are the type of franchising agreements?

There are 4 basic types of franchise agreements: Single-unit, multi-unit, area development and master franchising. A single-unit franchise is the most common and is simply where a franchisor grants a franchisee rights to open and operate one single franchise unit.

What type of business arrangement is a franchise?

Franchising is a kind of licensing arrangement wherein a business owner, known as the "franchisor," distributes or markets a trademarked product or service through affiliated dealers, who are known as "franchisees." While these franchisees own their establishments, terms of franchising agreements typically require them ...

What are the 5 types of franchising?

The five major types of franchises are: job franchise, product franchise, business format franchise, investment franchise and conversion franchise.

What does it mean to franchise a business?

When you franchise your business it means that you have taken the necessary legal and business steps to sell franchises, support franchisees, and grow your brand. First and foremost, your franchise lawyer will have to prepare and issue a Franchise Disclosure Document that complies with federal and state law.

What is a franchise agreement?

Franchising is a legal and business relationship that can help grow your business. A franchise is created by a legal agreement that involves the license of a trademark, the payment of a fee, and control over the operations of a business. When you franchise your business you’ll be creating the legal documents, pre-sale disclosures, ...

What Are the Franchise Laws and What Is a Franchise Disclosure Document?

Franchising is regulated and requires compliance with federal and state franchise laws.

How Long Should It Take to Franchise My Business?

Typically, franchising your business takes from 90 to 120 days. Depending on unique factors related to your business or industry, there could be variations. A lot also depends on who you are working with and your internal team.

Can a Franchise Developer or Consultant Prepare My FDD Instead of a Franchise Lawyer?

No. Your FDD is a legal document that requires the integration of federal and state-specific franchise laws and regulations and should only be prepared by a qualified franchise lawyer.

How Do I Get Started?

By reading this guide, you’ve already taken the first step! Now that you have a solid foundation as to what franchising is all about and the steps involved, start building the right team to help support and guide you in franchising your business .

How long do you have to give FDD to franchisees?

It’s required by federal and state law and is the legal foundation for your franchise. You are required to give prospective franchisees your FDD no less than 14 days before signing any agreement with a franchisee or accepting any payments from a franchisee.

How to Implement a Successful Franchising Strategy

Understand how channel management and retailing can improve performance in your business. Nowadays, a distribution strategy is part of the DNA of many companies and a correct channel management is key for the success of your product.

Skills You'll Learn

At the end of this module you will be able to identify various growth opportunities for retailers and determine which entry strategies are best for various circumstances. You will also know the importance of a strategic online presence for retailers and future trends in retailing.

How much does it cost to start a franchise?

Franchise costs vary widely depending on the industry and business you choose to invest in, not to mention where you live or plan to do business.

How long does a franchise contract last?

Franchise contracts come with terms of five to 20 years. At the end of the term, you can often choose whether to renew the contract or discontinue your franchise. At contract signing, you’ll likely need to also pay any upfront fees or initial investment expenses.

How long do you have to get a copy of your FDD before signing a contract?

The franchisor is required to provide you with the FDD at least 14 days before you sign a contract, though it’s a good idea to request a copy earlier in your initial phases of research. You can typically download a PDF of the FDD, though some franchisors might be willing to send you a hard copy. 5.

How to get a copy of a franchise disclosure document?

Reach out to the franchisor for a copy of its franchise disclosure document (FDD), which contains detailed legal information about its franchise group along with financial data like the average gross revenue of its locations.

What to do if you don't have a franchise?

If you don’t have the initial investment costs at the ready, you may need to tap into outside financing to launch or run your franchise. Many banks, the SBA and franchise-specific lenders offer financial help for would-be franchisees. Other options include crowdfunding or lenders based entirely online.

Why do you need a business plan?

A business plan is necessary if you plan to apply for a loan to help with startup costs. Lenders want to know that you have a viable plan for turning a profit and sustaining your business over the long haul, because it helps them evaluate whether you’ll be able to pay it back.

Where is the Critter Control franchise located?

Let’s say you want to open a Critter Control franchise in San Jose, California — a city with a population of about 1 million people. At an average $582,828 gross revenue for that market, according to Critter Control, here’s what you could reasonably expect.

What is franchising in business?

“Franchising is a vertical co-operatively organized sales system of legally independent entrepreneurs based on an ongoing contractual obligation. This system has a uniform market identity and is characterized by a work sharing performance program of the Franchisee and the Franchiser as well by an instruction and control system that ensures behaviour in conformance with the system.”

What is franchising in marketing?

According to Hunt (1972), franchising is a ‘vertical marketing system in which one form (the franchisor) provides another individual or firm (the franchisee), for consideration, a licensed privilege to do business in a specified geogra­phic area, along with assistance in organizing, training, merchandising, and management’.

What is the method of franchising called?

Method # 4. Sub-Franchising: The method of franchising is often called master franchising.

What is sequential franchising?

A variation on sequential franchising is area development. If the Franchiser uses this method of franchising, the Franchisee would become an “area developer.” Unlike sequential franchising where the first Franchisee could gain an additional franchise only after proving his capability, the Franchiser would then expect the first Franchisee to establish and manage these stores himself, with the assistance of hired employees.

What is single unit franchising?

Every Franchisee would then operate the business in a particular location or area. This is called single-unit franchising. The result is often a Franchiser with a number of Franchisees owning and operating individual stores in different locations. Method # 2.

Why is authentic legal important?

It indicates building proper and authentic procedures to expand franchising business in different locations. An authentic legal aspect helps both the parties of franchise to continue their business in an effective manner.

Why is technology important in franchising?

In today’s automatized world, all the business largely depends on internal communication and software systems. Any fault or failure of technology may hamper the process of franchising business.

What do franchisors need to do to replicate their business?

In order to create this replicable model, Nicol says first-time franchisors also need to heavily document how they’ve successfully established the concept. “Prospective franchisors need to create a system of procedures and operations that somebody else can follow,” he said. “It may not be polished or totally complete, but they need to document how the business started, how it should be run, how it should be staffed and more.”

How does franchising increase revenue?

With the right plan in place, franchising can increase a company’s revenue through franchise fees and royalty payments paid by the franchisee, as well as expand brand recognition as the franchise reaches new markets and customers.

What do franchisors need to hire?

From there, emerging franchisors need to hire a good, tenured corporate support team to provide ongoing support and training to all new franchisees. If growth stalls after the first few locations, Nicol recommends taking a hard look at the marketing strategy for bringing in new franchise leads.

What is a franchise disclosure document?

These documents outline the responsibilities of franchise owners, fees and tax responsibilities, financial performance history, rules pertaining to trademarking and much, much more.

How long does it take for a franchisor to become royalty?

Nicol agrees being properly capitalized is essential. “Typically, a franchisor does not become royalty sufficient until around 75 to 100 open units ,” said Nicol. “That means it takes quite a bit of capital to create and grow a franchise successfully. Sometimes a franchisor will also hold on to their pilot location for too long. Oftentimes, franchisors will need to sell their pilot location and use those funds to focus on the franchisor side. ”

What is auditing a franchise?

Audits are one way to monitor franchisee compliance. However, for most franchise systems, putting a franchisee on notice that it will be subject to an audit is a difficult step. Some franchisors see it as contrary to building and developing a cooperative business relationship. Most systems are trying to add locations, ...

What is the reaction of a franchisee to an audit?

The franchisee’s initial reaction will typically determine the cooperation that will be received and the level of concern the auditors will carry with them.

How long does a franchisee audit take?

Audit teams usually number one to four individuals, depending on the size of the project, and audits will typically last one day to a week, depending on the scope, size and volume of the records under review. Different auditors have different approaches. The most successful method to conduct an audit is to obtain the necessary records in the least amount of time and with as little disruption to the franchisee as possible and then to quickly and accurately apply the procedures to validate compliance or accurately substantiate levels of noncompliance.

Why are honest franchisees important?

The honest and compliant franchisees will support such an initiative, because the objective is to ensure a level playing field. The non-compliant franchisees are a threat to the system, by hurting the concept’s financial footing. Non-compliant franchisees are also avoiding the obligations that honest franchisees are meeting, so basic notions of fairness support audits. It is in everyone’s interest that no one be allowed to cheat the system. Moreover, even the compliant franchisee will get direct benefits from an audit because auditors can pass along information that can assist the franchisee in improving its operations, including issues such as internal theft, weak internal controls, and out-of-line operational costs.

How does an audit help a franchisee?

Concerning the cost-benefit, many franchise agreements have clauses, which provide that if franchisee noncompliance reaches a certain threshold, the audit costs must be borne by the franchisee. Thus, franchisors can recoup the costs of an audit program in many ways. Including the increased revenues generated by better franchisee compliance and the opportunity to charge non-compliant franchisees for audit costs. To garner support for the initiative, it is important to emphasize how the results of an audit can actually help a franchisee. An audit will examine expected gross profits, payroll percentages, operating expense relationships, and such. Not all franchisees properly monitor or control these financial performance indicators. By providing information to franchisees on the operational results of their businesses, an audit program can help them understand areas that need improvement to enhance profitability.

Why is audit important for franchisors?

Thus, an audit program can serve the interests of both the franchisor and the franchisee by ensuring system compliance, while at the same time providing insight into areas where the franchisee could improve its operations .

Why is franchise system endangered?

A franchise system will be endangered if either party fails to meet its part of the bargain. There is no doubt that franchisees typically keep a close eye on how their franchisor runs the system, to ensure that proper investments are being made into the concept and that the concept is being properly run and promoted.