How to Franchise Your Business

Franchising your business has tremendous advantages, from a higher return on investment (ROI) to risk reduction and retention of capital. But before you begin the process of franchising your business, you must first determine if your concept and operating system are franchisable.

Basic tenants of franchisability include:

• Credibility. A franchisor must be credible to prospective franchisees.
• Uniqueness. Your business must have sufficient differentiation from other franchises either in terms of products and services, marketing, lower investment cost, or target market.
• Straightforward operations. Your system and business model should be relatively easy for a new franchisee to learn in a short time frame.
• Adaptability and demand. Your concept should adapt well to many locations and there should be sufficient demand for your products/services.
• ROI. A franchised business should have enough profit after paying fees and royalties to earn an adequate return on investment.
• Strength of management. Even the most successful company will falter without a strong management team in place.

If your business passes this litmus test, you will need a franchise plan and a business plan. A franchise plan is not the same as a business plan. Essentially, the franchise plan is a plan for franchising your business, detailing all of the steps you will take, as well as the franchise fee. The business plan outlines your overall business strategy over the next five years.

Next you will need an operations manual and training programs for your franchisees. In order to legally sell franchises, you must draft a franchise agreement and a Franchise Disclosure Document (FDD) and file with the appropriate state and national authorities. A franchise attorney can help you create these documents and meet the legislative requirements.

One of the main reasons franchising is attractive to franchisees is that they are buying the rights to use an established trademark and/or brand name. If you have not already done so, make sure that your intellectual property rights are available and register them.

In order to sell franchises, you will need a marketing plan. Marketing efforts could include a sales campaign, such as direct mail initiatives, franchise sales brochure and collateral, a sales videotape, a Web site with franchising information, paid placement on franchise opportunity Web sites, listing with a franchise brokerage firm, and trade show participation.