9 Things You Need to Know Before Franchising Your Business Franchising is rewarding if done well — that said, it is not easy to establish your brand, so start off the right way and learn more before you start the process.
By Dawn Abbamondi Edited by Maria Bailey
Opinions expressed by Entrepreneur contributors are their own.
Business owners often contemplate the next steps for their business and franchising is a popular expansion method. If you are considering growth options for your business, one of the internal questions you may ask yourself is whether it is better to open more locations and expand the territory you currently serve or franchise your business. If you are thinking about it, franchising is one of the best ways to expand without investing all of your own capital into the new operation(s). That said, it can be confusing until you get to know more about the industry.
To get you started, here are nine things to know before franchising your business.
1. You are starting another business
Take a portion of the funds you were going to spend to open a second or third unit, and put it towards developing your franchise offering. You will have a new entity, and no matter what you are doing now, being a franchisor will put you into a new role.
Instead of operating your current business, you will be leading others to follow you. Education, support, mentoring and coaching are all part of being a great franchisor.
Related: 5 Must-Ask Questions Before Opening a Franchise
2. Your existing business should be able to operate without you
Are you essential to the operation? Think about how you run the business: Are you the only one finding new customers, making products, delivering the service or creating sales revenue all the time? If you are the only one who can do it, you might need to shift your focus.
You will need to transition to support franchisees, not running the day-to-day business. Think about your team and who can step up and backfill some of your roles. Identify someone who can learn how to manage the other staff and let you focus on the franchise side of the growth. You will still be available to them, you are not really "going anywhere" but you want them to grow into the management role and leave you free to develop the brand and manage franchise expansion.
3. Your business should (ideally) fill a void in the market
You're not just another "we do it too" brand. You have growing demand from customers or, your business is unique in its image, atmosphere and culture. This is perfect for franchising. This will help customers relate to your brand and be loyal to come back again and again. Creating brand awareness in a new market will be the basic first step to getting new customers for your franchisees and is easier if you are a bit different from anyone else already there.
4. If you don't already have one, file for your trademark
If you do not have a trademark, it is fine, but now is a good time to apply to have your brand name on the federal registry. Then, you will be ahead of the process for your registered trademark once you have decided you will be franchising your brand.
This will help to protect the franchisee's right to operate the brand name in each state in the country and create a stronger, more protected brand name because no one else will legally be able to operate using that name in the U.S.
Best practice: Retain records using the name along with samples of the various ads or signs you have used. This can help to create the historical precedence of your name and marks to be even stronger in defense if there is a similar name in another market later on.
5. Get your website URL and social media handles now
Like the federal trademark, you want to be able to protect the assets related to your intellectual property everywhere — even on social media sites, you may not use today.
Set up the names — get those unique handles and channel names — start using them, even if it is just once a week or so. You'll be happy you did.
6. It is all about the royalties
In addition to an upfront franchise fee, you will be paid a royalty weekly or monthly depending on what you decide is right for your business model and industry.
Important to note: While the initial franchise fee is a larger amount of money all at once, it is not repeatable, recurring revenue. You want to be able to help your franchisees generate revenues on which you are paid a percentage or a flat fee. This royalty can become predictable over time and help you budget covering your operational expenses of the franchise company – including brand development, operations support, admin staff, training and more.
7. The franchisor leads the success of franchisees
As the franchise founder, you are the one responsible to make sure you bring the right franchisees into your brand. Whether you lead the sales effort or you have a team to help, you are the last word on whether they are a great fit, or not.
Make sure each franchisee aligns with your culture and has the financial capability to operate, manage and make the business successful.
Be ready to say "no" if they are not going to help the brand grow and be a part of the team.
Related: Want to Franchise Your Business? Make Sure You Know These 5 Things
8. Your franchise brand can be regional, national or worldwide
The sky is the limit, but you don't have to expand "everywhere" — now or ever. It is often best to start franchising your brand in the region where you currently operate. Develop strong franchise owners in your area first; then grow into new markets, states and even internationally if you want.
You know best if your products and/or services are applicable to other areas, so don't feel obligated to expand into another part of the country where you don't think the brand can be as successful.
9. It's hard, but can be very rewarding
Like any new business, there is a learning curve and it can take time to reach your goals. Also, success can be found in a variety of ways — not just financially. Many franchisors realize personal satisfaction, knowing they helped others achieve their dreams through their brand.
Look forward to the future, one day, you will be able to look back and see how you helped independent business owners follow your system, generating revenues and serving customers in a local market — expanding your franchise brand into a household name – creating wealth for them, and for you.
Remember that this is just getting you started. Do some more research. Read, listen to podcasts and learn more from industry publications (like Entrepreneur), the International Franchise Association (IFA), and leaders in the industry such as suppliers or other franchisors. You will know when you are ready, but it is totally normal to ask for help.
