Franchising a business is oftentimes necessary to expanding a business. A franchisor is someone who franchises their business to an outside party. Franchising a business can be a lengthy, arduous process. As a business owner looking to become a franchisor, there are some things you should know before you begin. Read on to learn how to create a franchise and become a franchisor.
The first step to becoming a franchisor is to generate capital. Generating capital is important because franchising is costly. Most franchisors don’t make money until they’ve placed a few franchises. Knowing franchise costs will also help you generate your capital. You’ll find that volume is typically low early on, leading to poor franchise fee income. This low income can potentially last a year or two. You may go out of business entirely if you don’t have enough money. You’ll need to be able to sustain your business until your franchises become profitable. You should become a franchisor when you have a surplus of cash flow, or if you’ve secured enough capital. Make sure you have enough capital before you even consider franchising.
Register Your Trademark
You will need to register your trademark to become a franchisor. Registering your federal trademark will protect your franchise’s technology and trade secrets. It will also give you exclusive rights for nationwide use, as well as evidence of ownership. You should consider using an attorney to best protect your franchise. You should discuss what protections you want for intellectual property, goods, and services. After finalizing the terms of the trademark, have your attorney file it with the United States Patent and Trademark Office. Registering your trademark will prevent legal issues in the future, and is the first legal step you should take to become a franchisor.
Create An Operations Manual
The next step to becoming a franchise owner is creating an operations manual. Legally, you are required to provide an operations manual to all of your franchisees. Your operations manual should detail how operations are run on a day to day basis. You should also have a section on administration. Include other information such as responsibilities, fee payment, and compliance to rights and responsibilities. After determining all the relevant information, you need to write the manual. You can write the manual personally or use a professional service to generate your manual. Though writing the manual personally may be cheaper, a professional service will be faster and more thorough. Preempt franchise issues by making a comprehensive operations manual.
Prepare Your Franchise Disclosure Document (FDD)
Another necessary step for becoming a franchisor is preparing your Franchise Disclosure Document. The Federal Trade Commission (FTC) requires that franchisors provide franchisees with a Franchise Disclosure Document (FDD). The document must include history of the business, rules and restrictions, and renewal terms. Due to all the relevant information, FDDs can be hundreds of pages long. You should strongly consider hiring an FDD attorney. Attorneys are more familiar with the necessary information and will be able to draw up the FDD for you. Also, some states require that you register the FDD with the state department. To become a franchisor, proper preparation of the FDD is crucial.
The final step to becoming a franchisor is to recruit franchisees. The process of recruiting includes finding, training, and motivating potential partners. You need to make sure that you find good franchise partners to ensure your success. A good franchisee will be attuned to your business model and plans for future success. You can find partners by searching for experienced businessmen and women. Make sure that they understand your business’ brand and philosophy. Good franchisees will act according to what’s best for the business as a whole. Avoid partners that are solely interested in their own profit. Recruiting the right partners will improve your odds of becoming a successful franchisor.
Becoming a franchisor is a long but rewarding process. Look for the best franchise opportunities for your business. Make sure you’re legally in the clear by registering your trademark, creating an operations manual, and preparing your FDD. On the business side, generate capital and recruit franchisees. If you follow these steps, you will become a franchisor.