How to Franchise Your Business: 6 Steps Guide

Business is all about growth. Sometimes, that means expanding your space or capacity or opening up new locations. You also have the option to “franchise” your business. Basically, that involves giving someone else a license to run a store or operation under your brand name and with your products. Depending on the terms of the franchise agreement, you may require the franchisee to set up their stores a certain way, use certain supply chains, keep certain hours, and other terms to make sure your brand is represented properly. The franchisee will pay you a franchise fee to start, as well as royalty fees going forward.

Turning your small business into a franchise require specific steps, careful planning, and plenty of attention to detail. When it’s all said and done, however, the franchise payout can be quite lucrative. Ever heard of McDonald’s?

Here are six steps to take if you’re serious about franchising your small business. And who knows? With some luck and hard work, your tiny burger joint may even be the next Golden Arches.

1. Reacquaint Yourself with Your Start-Up Days

One of the benefits of running a franchise is that all the business details are laid out ahead of time. From keeping the books to purchasing the burger buns, franchisees follow a set script on how to run the business. The Golden Rule in the franchise world is consistency.

When you’re setting out to create a franchise, you first goal is get reacquainted with the ins and outs of your own business. You’re going to have to recreate the steps of starting your company so that you can the walk prospective franchisees through each of those steps to achieve the same end result. Remember how you set up shop? What problems did you run into? What could have made things easier? Take meticulous notes and keep detailed records as you revisit your startup process. These notes and records may eventually become the handbook for your franchised businesses.

2. Brush up on Your Business Law

Franchising your business requires precise adherence to certain legal requirements. It’s your job to become familiar with these issues. A franchise is a formal legal structure and you have to handle those formalities. One area that trips up many prospective franchise owners is Item 19 on the Franchise Disclosure Document filing. Item 19 of the FDD is the area of the application pertaining to financial disclosures. Ensure that it’s fully, thoroughly, and accurately completed, and that you have attached all relevant supporting documentation.

In general, your best bet is to work with an attorney that has experience with franchises. They’ll be able to help you get started on the right foot and avoid expensive and time-consuming pitfalls.

For more information and resources on legal issues pertaining to franchising, visit the International Franchise Association.

3. Perform Due Diligence on Your Intended Market

One of the challenges you’ll face when starting out your franchise is determining where you want your market to be. There’s no sense in going through the work of setting up a franchise agreement somewhere the store is going to fail.

Conduct market research to see if your particular business model, brand, and product will be well received in each of your target markets. A California fresh vegan taco business may not be a hit in certain cattle-ranching areas of the Midwest. Know your market and your intended customers for the best results.

4. Find Prospective Franchisees

Your franchisees will be the public face of your business, your brand ambassadors, and your money makers, so you want to ensure the right fit on both ends. Selecting franchisees will be similar to hiring employees in that there will be an interview process. However, the franchisee application should be far more detailed than a typical employee application. You will request and review application materials as well as financial documents with the goal of finding the best qualified, most financially viable franchisee owners.

Just as with a traditional job application, you should also consider the personality of the franchisee. You want someone who’s excited about the business prospect, but also aware of the work involved in making your franchise a success.

Remember that your customers are going to view you and your franchisee(s) as one and the same company – make sure your franchisees are going to do good work and represent your brand well.

5. Set Up Your Franchise Agreement

Part of running a franchise is finding the right balance between staying on-brand and allowing each independent franchisee the proper amount of autonomy. Decide early on what aspects of branding, customer service, menu items, décor, marketing materials, etc. will be important to maintain from franchise to franchise.

One way to ensure that your franchisees are staying true to the company’s global branding vision is to request that they submit new ideas to the company before approval. That way, each franchisee will have some latitude to pitch new ideas to grow the brand, while you will have ultimate say over those ideas.

6. Communicate With Your Franchisees

Each of your franchisees is a small business owner, starting their own business from the ground up. As the head of the franchisees, it’s important that you provide the necessary support to your franchisees regarding training, business best practices, and trouble-shooting.

Your goal, over time, should be provide enough support so that your franchisees can take over all aspects of operations with minimal supervision on your end. Communication lines should always be open, however, for all your franchisees. Your business relies on their success, so surmounting challenges as a team will help to grow your business and your brand.

Is Franchising Right For You?

If you’re a small business owner who wants to turn their business into a franchise, the truth is that it CAN be done. If you follow the necessary steps, consult legal and financial pros, and put together a comprehensive plan, your small business may just be the next great American franchise.