How to Franchise Your Business

To franchise your business successfully, there are many steps that must be completed to ensure your franchise offering is attractive to prospective franchisees.

When researching how to franchise your business, it is important to recognize that there are many aspects involved in franchising, including legal, operations, marketing, and sales. Under these primary categories are franchise training, support, communications and other related subcategories. Our goal is to fully assist you in understanding how to franchise your business successfully. Below is an outline of the key steps when considering and implementing a franchise expansion program.

Determining the Best Method of Expansion

When considering franchising your business, it is important to begin by carefully analyzing various business expansion methods to determine the methods that are the most applicable to your expansion goals and the control you wish to have over the individual locations. Once you determine the expansion methods you wish to consider, you should evaluate the pros and cons of each method in relation to your business and your expansion goals. FranSource assists prospective clients in determining whether franchising is the best method of expansion for their business.

Determining the Franchise Structure

The franchise development process begins by examining the existing organizational structure of your company to determine if any modifications are required. For example, the majority of our clients elect to form a separate legal entity to be the franchise company, while keeping ownership of the trade name and intellectual property under their existing legal entity. This separates the assets and liabilities of each company while enabling the company to use its operating history and financial performance as the basis for the franchise offering. During the franchise development project, our affiliated attorneys prepare an intercompany license agreement between the two legal entities which “connect the dots” between the two entities for disclosure purposes.

Trademark Status

Although having state and/or federal trademark rights to your trade name is not required under the FTC Franchise Rule, trademark registration is an important aspect of franchising your business. Having federal trademark protection of your trade name and logo is important to ensure you are legally permitted to use your tradename and logo throughout the U.S. It also assures franchisees that they will be permitted to use your trade name in their area. Our affiliated trademark attorneys assist clients in filing trademark registrations with the United States Patent & Trademark Office.

Preparing the Franchise Disclosure Document

Under the FTC Franchise Rule, franchisors are required to prepare and disclose specific information regarding their company and the franchise business model in the Franchise Disclosure Document (“FDD”). FranSource and our affiliated franchise attorneys advise clients through every term and provision that may be included in their FDD and assist them in determining specific terms and provisions regarding franchise fees, royalty fees, advertising fees, franchise territory criteria, site selection requirements, reporting requirements, and much more.

Establishing Franchise Reporting Requirements

Franchisees are typically required to provide information to the franchisor regarding sales, financial data, business income and sales tax returns, and other similar information specified by the Franchisor. FranSource advises and assists clients in determining and establishing applicable reporting requirements for their franchisees.

The Franchise Operations & Policies Manual

When franchising a business, a comprehensive “Franchise Operations & Policies Manual” (“Manual”) is one of the most effective methods of conveying policies, procedures, and operating protocols to new franchisees. The Manual also serves as an ongoing resource manual for existing franchisees. At FranSource, we do the heavy work of drafting each section of the client’s entire Manual and reviewing each section with them. With over 30 years of experience drafting Manuals, we understand the importance of a robust Manual to the operation of the franchise business and its impact on franchisees and franchisors. A comprehensive Manual also eliminates franchisees having to constantly contact the franchisor with questions, which ultimately costs the franchisor time and money and may lead to franchisees not operating their businesses according to the franchisor’s standards and specifications.

Establishing the Initial Franchise Training Program for Franchisees

It is important to establish an initial franchise training program for franchisees, and potentially, their manager and key employees. This ensures franchisees and their employees are properly trained in all aspects of the franchise business operation. FranSource advises and assists clients in developing appropriate training programs as well as training itineraries to be included in the FDD that outlines the training content, hours devoted to each topic and other related information.

Establishing Franchise Communication & Support Programs

To further ensure the success of franchisees, FranSource advises and assists clients in determining the types of communication and support programs that will be provided to franchisees during the pre-opening period and once the franchise is operational. We also advise clients concerning additional communication and support programs that may be provided to franchisees as the franchise network grows.

Franchise Grand Opening Support

Many franchisors provide franchisees with on-site operational support and/or additional franchise training during the grand opening period. FranSource advises and assists clients in determining the types and amount of onsite support and/or additional franchise training that will be provided to franchisees during the grand opening period.

Ongoing Assistance, Training & Support

As a franchisor, it is crucial to your ongoing success to provide franchisees with ongoing operational assistance, training and support. This can take many different forms depending on your franchise system and business operation. Ongoing assistance, training and support may include providing advisement to franchisees via email, phone and web meetings when requested, occasional onsite inspections and secret shops at the franchise business, supplemental employee training for new key employee hires, monthly owners’ and/or managers’ meetings, and other similar initiatives. FranSource advises and assists clients in determining and developing the ongoing assistance, training and support programs that best fit their and their franchisees’ needs.

Establishing the Franchise Sales Development Process

An important step in the franchise development process is to establish appropriate franchise sales procedures for the franchise operation. At FranSource, we prepare a Franchise Sales Development Manual for clients that outlines the entire sales process from point of contact to signing the franchise agreement. The sales manual also includes the Franchise Sales Action Plan for the franchise CRM system, and scripting to use when speaking with prospective franchisees. In addition, we prepare all of the franchise marketing materials, forms, CRM campaign emails, and much more.

Establishing the Franchise Advertising & Marketing Plan

A major key to successful franchise sales is a franchise advertising and marketing plan that attracts the ideal candidates. FranSource advises and assists clients in developing their franchise advertising and marketing plan based on their budget and franchise expansion goals and the ideal candidate profile. We can also assist clients in fully executing the plan.

Qualifying Prospective Franchisees

One of the most critical aspects of successful franchising is to “qualify-quality-qualify” prospective franchisees during the franchise sales process to ensure there is a mutual fit between the prospective franchisee and the franchisor. FranSource assists clients in determining the ideal characteristics of a franchisee as part of the development of the franchise sales development process.

If you believe franchising may be the right method of expansion for your business, we encourage to complete our 15 Key Questions Franchise Quiz as an initial indicator as to whether your business is ready to franchise. Your responses to the quiz will also help us mutually determine if franchising is the best method of expansion for your business.