Becoming a Franchisor

Franchising is one of the strategies a business can use to expand and capture more market share. The benefit of franchising allows you to expand your business without incurring additional debt or giving up equity. The following pages are designed to help you answer three questions.

  • What are the 12 steps to becoming a franchisor?
  • What are the 13 major considerations to address before franchising?
  • What are the 20 characteristics of successful franchisors?

12 Steps to Becoming a Franchisor

  1. The Establishment of a Successful Prototype
  2. Completed Legal Documents: Uniform Franchise Offering Circular, and License Agreement
  3. Development of a Proven Operating System
  4. Completed Individual State Registrations
  5. Preparation of a Business Plan with Financial Projections
  6. A Franchise Sales System for Generating, Qualifying, and Granting Franchises to Qualified Prospects
  7. A Financing Strategy for your Company’s Growth
  8. A Training Program for New Franchisees
  9. Preparation of a Marketing Plan for Expanding Your Franchise Company
  10. A System to Provide On-going Support for Franchisees
  11. Name and Logo Design
  12. Registration of the Mark

13 Major Considerations to Address before Franchising:

  1. Are you willing to accept decreased control over the running of your business?
  2. Are you comfortable with the fact that the nature of your business will NOT change?
  3. Are you willing to comply with the various regulatory requirements, including making your financial statement public?
  4. Is it possible to grow as rapidly as you desire with company-owned operations (vs. franchised operations) considering the availability of capital, ability to attract appropriate and motivated personnel, and your personal goals?
  5. Have you prepared the appropriate financial projections to determine the
    income from franchised operations and compared those results to those of company-owned operations to ensure that the decision to franchise makes economic sense?
  6. What will be the initial fees, length of contract and renewal requirements?
  7. What territory, if any, will be granted to the franchisee?
  8. Will you or the franchisee be responsible for site selection?
  9. What products and services will be provided to the franchisee, initially and ongoing?
  10. What service fees and other continuing revenue will be paid to the
  11. What guidelines will be used to insure the quality control of operating procedures?
  12. How will you protect proprietary information from your competition?
  13. What will be the grounds of termination of a franchise license agreement?

20 Characteristics of Successful Franchisors

  1. Good product/service.
  2. Broad geographical
  3. Broad market demand for the product/service
  4. Market is growing and is not saturated
  5. Market is not mature
  6. Market is a trend and not a fad
  7. Product/service is a trend and not a fad
  8. Excellent operational (technical) support
  9. Market development support provided to the franchisees to penetrate, build, and dominate a local market
  10. Market support provided by franchisor to the whole system to enhance the value of the Brand
  11. Franchisor is well capitalized
  12. Brand is properly promoted to current and future customers in order to drive the market to the customers.
  13. Franchisor provides excellent training
  14. Franchisor provides excellent start up assistance
  15. Franchisor provides excellent Operations Manuals
  16. Franchisor provides excellent ongoing support
  17. Franchisor has a research and development department to add new offerings to the franchisees products and services
  18. Franchisor is concerned with the franchisee making a profit and not just with making money for the franchisor.
  19. Franchisor teaches the franchisee to understand what franchising is and how it works as a business and marketing system.
  20. Franchisor is totally consumed with developing disproportionate market share.

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