If your business is booming, franchising could be the next logical step for continued growth and success. Franchising is the perfect opportunity for your brand to expand, while also allowing other people to become business owners and part of that brand. Learn more about how to open a franchise or even establish a franchise from your existing business.
How to Buy a Franchise
Being a first-time franchise owner can feel overwhelming. You’re entering a new field and might not know all of the ins and outs. Don’t worry; FranServe is here to help. Here are the basic steps to setting up your own franchise.
1. Determine a Budget
Franchises come in all shapes and costs, and you need to get your finances in order before you even start to look for a franchise. Not all franchises are expensive, but you need to have a budget so you know when something is out of your league.
2. Research the Local Market
Becoming an expert on your local market can help you see what’s successful in your area, as well as where there are potential gaps in services that a franchise could fill.
After researching your community’s needs, do a deep dive into the different franchise opportunities for sale. Depending on your experience and location, franchises that offer training and guidance in how you should run the business may be more helpful in your situation.
3. Read the Franchise Disclosure Document
Your initial market research should be in-depth and rigorous, but the best information you can get about a franchise is from the franchise itself. The franchise disclosure document (FDD) provides complete insights into the success of the brand, including sales figures and other key business information.
We recommend comparing and contrasting FDDs across multiple franchises. Often, new investors don’t know if the information they are reading is impressive or a potential red flag until they compare multiple FDDs.
If you’re still interested after reviewing the FDD, attend a discovery day. These days are hosted by the franchise and will give you personal time to ask any questions you have and potentially gain a franchise offer or agreement.
4. Sign and Follow the Franchise Agreement
Once you have found the perfect franchise that will fit your area, budget, and management experience, you will be offered a franchise agreement. A franchise agreement ensures you and the franchiser both agree on responsibilities and duties within the agreement and will act as a roadmap as you set up the franchise.
How to Franchise an Existing Business
Having a successful business is an amazing experience, but it can be daunting to expand past your initial storefront. Trying to enter a new market and starting from scratch can feel risky. Rather than stretching yourself too thin by trying to manage too many locations at once, starting your own franchise model is a great solution to expand your company without putting your success at risk. Here are a few of the things you need if you are going to franchise your business.
1. Gather Necessary Information
A key part of franchising your business is showing other people what makes it so special. You will need to provide exact details and guidelines to help get the franchise up and running, which means you need to know exactly how you found success. This should include a complete understanding of the marketing, staffing, supply chain management, training, and any other essential part of your company that helped you get where you are today.
2. Complete a Franchise Disclosure Document (FDD)
FDDs are strict in how they need to be presented, so you need to speak to a lawyer to make sure you’re doing it right. They will provide potential franchisees with all of the essential information they need to see the profitability and sustainability of owning a part of your franchise.
3. Create a Franchise Agreement
You get to determine your relationship with your franchise owners. Your lawyer who helped with your FDD can create your franchise agreement, and you could also include a mentor or other expert in the field who can speak to their working experience as a franchisee.
Part of your franchise agreement should be centered around how you are going to support your franchisees. This can include a training structure and support system as well as a system for highlighting their successes and wins.
4. Choose a Franchisee
The amount of work and research a franchisee goes through to find your company should be equally matched by you getting to know them. Being picky and finding the right fit for your franchise is essential. You need to know that your brand is in the right hands.
There is no pressure to respond to franchisees and offer them a deal. Take your time to make sure they’re the right one for you. Just because a person has the capital doesn’t mean they’re the right fit for your franchise.
Consider asking a few of these questions when meeting with potential franchisees:
- Have you been a franchise owner before? Experience with being a previous franchise owner can be both a good and bad thing, so you should follow up with additional questions. Ask them to tell you about their most recent franchise and if they are still owners. If you see habitual signs of failure or lack of care for franchise agreements, they may not be the best fit for your brand.
- What’s your experience in this industry? It isn’t necessary for a franchise owner to have experience in the industry, but it certainly helps. However, if they have never worked or managed in the industry, they might struggle when dealing with the complexities when they own the franchise.
- Why do you think my business is a good fit for your area? They should respond to this with the research they have done to show a need in a local market for your brand. If they haven’t done their homework in deciding to work with you, it might be a sign of further complications down the road.
- What is your experience with my brand? Franchisees are the face of your brand, but that’s very hard to do if they’ve never purchased or interacted with it.
Before you start the interview process, set up clear deal-breakers that will automatically remove potential candidates, and stick to those standards.
FranServe Can Help
FranServe is here to help you through every aspect of franchising. We know that it can feel scary or overwhelming at first, but we’re here to help you through every step of the process. If you want to know more about how to start a franchise, or if you want to take the steps to franchise your existing business, we can help. Contact us today to find out how we can help you reach your goals.