how to make your company a franchise

How to create a franchise for your business (6 simple steps)

Full Answer

How to make your business into a franchise?

• Set Realistic Goals. Franchising is more of a marathon than a sprint. ...
• Research Your Competitors. ...
• Develop Your Franchise Offering for Both Individual and Multi-Unit Sales. ...
• Make Sure Your FDD Is Compliant for Every State. ...
• Learn Franchising and Get Involved in the Franchise Community. ...

How much money does it cost to franchise your business?

When you google the cost of a franchise, oftentimes what pops up is simply the franchise fee, which can range anywhere from $1,000 to $80,000 or more. However, that’s just the fee to be a part of the franchise system.The total cost of a franchise, and therefore what you’ll need to invest, includes many other expenses. These expenses are listed in a chart (Item 7) of a brand’s Franchise ...

What are the advantages and disadvantages of owning a franchise?

These include:

• Limited Control: As a franchise business owner, you have limited control. ...
• Costs: Opening a franchise is not a cheap endeavor. ...
• Potential Leadership Changes: There is always the possibility that the franchise can be acquired and new leadership will move in.
• Lack of Privacy: Being a franchisee also comes with a lack of financial privacy. ...

More items...

Can you make money starting a franchise?

The franchisor doesn’t actually make much money if any at all from the upfront fee that a franchisee pays to purchase a franchise business. The investment cost of a franchise opportunity is simply there to cover the cost for the franchisor in terms of bringing a new franchisee on board. Making strong investments in new franchisees will ensure they get off to a great start. The following fees are usually covered:

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

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

Does My FDD Have to Be Registered or Filed?

The answer depends on where you will be offering and selling franchises. At the federal level, the FDD is not registered or filed with a government agency. Although your FDD must comply with federal law and the Federal Franchise Rule, compliance is self-regulating, which means that it’s up to you and your franchise lawyer to make sure that your FDD is properly prepared and issued. At the state level, in the franchise registration states, your FDD must be registered with the designated state regulator before you can offer or sell a franchise in that state. In the franchise filing states, you must make certain filings with the designated state regulator before offering or selling a franchise in those states. In all other states, you may offer and sell franchises as long as your FDD is current and in compliance with federal law.

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.

Do I Have to Work with a Franchise Lawyer?

If you are going to franchise the right way, you need to work with a lawyer who specializes in franchising and who is experienced in working with new and emerging franchisors like you.

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 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 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.

What are some online lenders?

Other options include crowdfunding or lenders based entirely online. Online lenders like Kiva and BlueVine aren’t part of the traditional financial industry populated by banks and credit unions. These digital lenders tend to leverage technology for more streamlined or automated approval processes. You could also use an online business marketplace like Lendio or Fundera to compare a network of funding options in one spot.

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.

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.

What does it mean to be a franchising partner?

Franchising means you’ll work with entrepreneurial partners who have a greater vested interest in the success of the brand , said Kathleen Kuhn, president and CEO of HouseMaster.

How does a franchisor earn passive income?

With each new location that opens, a franchisor earns passive income in the form of royalty fees from their franchisees.

Why is it important to turn your business into a franchise?

Owning a franchise system offers numerous benefits, including the ability to enjoy scalable growth and recurring revenue through a motivated network of franchise operators.

What is needed to be a successful franchise?

Every successful franchise needs a knowledgeable team and system that can support its growth.

Is franchising a long term commitment?

Franchising is a long-term commitment, so be prepared to stay the course, said Osborne.

Is it expensive to franchise a business?

Setting up your business as a franchise can be both expensive and time-consuming. Because of the regulatory compliance and financial audits involved, you’ll want to invest in high-quality legal and financial professionals to help you on your journey.

Can you open a franchise one by one?

If you choose to open and operate new locations one by one, you may find yourself stretched too thin to properly oversee each store’s growth and progress. Individual franchise operators can devote that necessary time and attention to their own location (s).

What Is Franchising?

The International Franchising Association describes franchising as: “A method of distributing products or services involving a franchisor, who establishes the brand’s trademark or trade name and a business system, and a franchisee, who pays a royalty and often an initial fee for the right to do business under the franchisor’s name and system.”

Pros and Cons of Franchising

Building a franchise system and its earning potential is alluring to many entrepreneurs, but it requires a lot of time and dedication. Let’s weigh the pros and cons.

9 Steps to Franchising a Business

If you want to franchise your own business, you need to be clear about reaching your company goals. All steps should be realistic and founded on the very best business acumen and strategies that propel economic growth. Here’s how to turn your business into a franchise.

Conclusion

Building a franchise system is an extremely rewarding process that can turn a home service business into a household or even a global name. We hope our guide on how to start franchising your business has given you food for thought, and shed some light on the intricacies and processes of this business model.

What is franchise infrastructure?

Franchise infrastructure includes everything your franchisees will need to open and operate a successful business, including a franchise disclosure document, franchise agreement, operations manuals, brand policies, training and support, and more.

How many years of experience does accurate franchise development have?

Accurate Franchising has thirty years of experience in franchise development. Contact us today to find out how to convert your business to a successful franchise.

Do I need a business plan to expand my franchise?

Don’t forget that you’ll need sound financing to convert a business to a franchise, or to expand an existing franchise. You’ll need a business plan to show prospective investors how you will use their money to provide a fair return, and you may also need access to reliable funding sources. AFI helps our clients craft clear, comprehensive business plans that can be presented to private investors or to our qualified financing partners.