HOW TO FRANCHISE?

When you decide to launch your own business, you become your own boss. This means that you take ultimate control over your professional and financial future. If you open a traditional mom-and-pop business, it becomes your sole responsibility to plan and then manage all aspects of the business, with little or no outside support or guidance. You need to develop your own business plan; find your own location; handle all your own marketing, advertising, and promotions; train yourself and your employees; manage your own finances; establish relationships with distributors and supplies; and establish your company’s reputation in the community in order to build awareness and customer loyalty.

The benefit to owning and operating a franchise is that some (although not all) of the preliminary research and planning is done for you. As a franchisee, you’ll be starting off with a business model and plan that has already proven itself to be viable.You’ll also be offered training and ongoing support, have access to suppliers and distributors (if applicable), and be able to capitalize on the name recognition and logo(s) of the franchise.

Although a potential customer probably has no clue what to expect from Joe’s Burgers or Joe’s Sub Shop, virtually everyone in America knows when to expect when they step into a McDonald’s restaurant or Subway sandwich shop. Whether you walk into a McDonald’s in New York City or Houston, Texas, your experience as a customer will be virtually identical. This consistency is perhaps one of the biggest benefits of operating a franchise.

One potential drawback to operating a franchise (as opposed to an independent, stand-alone business) is that you must adhere to the guidelines and operating procedures out-lined by the franchisor, whether or not you agree with them.

You must also pay the required franchisor fees on an ongoing basis. In some situations, these fees make sense. In others, however, like when the brand name isn’t well known and the national or regional advertising isn’t helping your business, these ongoing fees may not make financial sense. In Chapter 3, we’ll take a closer look at the fees associated with owning and operating a franchise.

Franchise opportunities vary greatly. Some franchisors offer single-unit business opportunities. This means you (as the franchisee) obtain the right to open one single location or unit. There are also multi-unit franchise opportunities that allow you to open several locations, often within a specific region or territory. This means that as the franchisee, you’re given an exclusive territory or region. Some well established franchisors look only for franchisees who will ultimately want and be able to open multiple units within a predetermined time period.

In some situations, the franchisor might offer you what’s often referred to as a Master Franchise. This means that in addition to being the exclusive franchisee for a specific region or area, you have the right to sub franchise (sell additional franchises) to other prospective franchisees, and thus benefit financially.

When opening up discussions with a potential franchisor, make sure you fully understand the business arrangement and the type of franchise opportunity that’s being offered. As you begin negotiating with a potential franchisor, seriously consider hiring a lawyer who specializing in franchising to represent you. Becoming a franchisee requires you to sign a variety of binding legal documents and engage yourself in a potentially long-term business relationship with the franchisor. It’s vital that you understand what you’re signing, know what you can expect from the franchisor, and understand what’s expected of you. You can find referrals for experienced attorneys who specialize in franchising through the International Franchise Association (www.ifa.org) or through your state’s bar association. Early on, develop a relationship with an attorney whom you can trust and who can guide you through the process of acquiring, opening, and then managing a franchise-based business.