5 Keys to a Successful Franchise Model

One of the best avenues towards unchecked growth in the business world is by franchising one’s business. However, simply becoming a franchisor is no guarantee of success in today’s instantaneous, business-driven environment, as is evidenced by the startling amount of veteran franchisors filing for bankruptcy protection. Despite this harsh reality, many still strive to reach their goal of transforming their business into a globally recognized brand with satellite franchises on every continent. Having the right concept in mind from the outset expedites this process twofold by allowing you to hit the ground running while simultaneously setting up the infrastructure for an effective expansion strategy.

Those of us deciding whether or not we should franchise our businesses know that the costs are lengthy and steep. Consequently, just because we desire to franchise does not necessarily mean we will engage buyers. Today more than ever, the art of a successful franchise model is almost entirely dependent on several crucial decisions that are made in the infancy of your business. To help you navigate these channels as tranquilly as possible, here are five keys to building a successful franchise business model.

1. Make Sure Your Business is Ready

How will being franchised impact your business? Is it a good suit for your business? To obtain a better idea and adequately answer the question, you will want to examine your business’s sales, overall profitability, and several other factors. For instance, one of the most important factors for a successful franchise is a concept that provides customers with something familiar while simultaneously offering a unique spin on the concept. This is extremely evident in McDonald’s current menu strategy, which implements staple items alongside a variety of brand new items. Consequently, this factor offers variety and selection that is just as beneficial for customers as it is franchise owners.

2. Legalities

To be able to sell your franchises legally in the United States, it is essential to file a Franchise Disclosure Document (FDD) with the Federal Trade Commission (FTC). The FDD asks for audited statements, franchise operations manual, and forms attesting to the business experience of the management team. Additionally, some states add their own registration rules, with California and Illinois reputedly having the most strenuous. If all of this seems daunting to you, fear not: you can always hire a franchise attorney or franchise consultant with the knowledge and expertise to evaluate your decisions and ensure that everything is being filed correctly.

3. Decisions, Decisions…

While the paperwork is being prepared, take out a scratch piece of paper and start brainstorming some ideas on how you plan to operate as a franchisor. This will help you identify what decisions need to be made and whether your approach to them is advantageous. The points include determining the overall franchise fee and royalty cut, the terms of agreement, franchise locations (including size territories and geographic locations), where each franchise will get the equipment and products required for daily operations, and the specifics of your training program. Making a list for each of these considerations is a good idea because you will also need to evaluate how the laws of different localities could impact each franchise. Trust me, the franchise opportunities Chicago has to offer are going to be very different from what Los Angeles has to offer.

4. Paperwork and Registration

Now that all the important decisions have been made, it’s time to complete and file your legal paperwork. After you submit the document, the appropriate authorities will evaluate it and request additional disclosures if necessary. If they deem that nothing else is required, they may approve your application. Here, it is also important to consider the difference between the FTC and state rules: the FTC will immediately file the FDD, while state approval takes a little longer.

5. Essential Hires

As you get closer and closer to achieving your goal of becoming a franchiser, you will need a few employees who can focus on assisting the franchisees. For example, if your company sells franchises the equipment they use on a daily basis, you may need to set up a help desk that can assist them with any issues they may have. Additionally, you may want to hire someone who can address more general questions and tackle any unforeseen complications. Other roles to consider are trainers, marketing assistants, creative directors, and process managers, as each of these can come in handy when teaching franchisees how to adhere to company protocol and use your internal systems to their utmost advantage.

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