Are you considering scaling your business to benefit from a broader customer base? If so, franchising could be the perfect solution for you. But how do you go about designing a franchise? In this article, the franchising experts at the More Space Place site will explain the steps you need to take.
Before starting, you need to understand franchising and how it works clearly.
What is Franchising?
A franchise is a business relationship in which a franchisor (the owner of the original business) licenses trademarks and methods of doing business to a franchisee (an independent business person) in exchange for a commitment to adhere to specific standards and procedures.
The franchisor benefits from expanding their brand, while the franchisee benefits from operating under an established name with proven methods.
Now that you know the basics, let’s look at how to design a franchise.
Assess Your Business’s Preparedness
If your business has a good run and your sales and profitability are stable, you may think it’s time to start franchising. However, before you jump into this process, you need to realize that several factors will influence your decision. Let’s look at them in detail.
Give your business concept some thought – Most successful franchises provide a product or service that the customer is familiar with. However, to stand out above the competition, you’ll need to offer a unique approach that differentiates you from the rest of the pack.
For instance, if you’re considering franchising a fast-food restaurant, you’ll need to find a way to make your franchise unique. It could be in the form of a secret recipe, a new cooking method, or something else that will make your franchise stand out.
Remember that your franchisee and the end-user should gravitate towards your brand because it offers them the value they cannot find elsewhere.
Analyze your company’s finances – Before you think of franchising, you need to evaluate your company’s financial reports to determine if your business has the capacity for growth. It is vital to have a clear understanding of not only where your business stands today but also where it will be in the future.
Conduct market research – To evaluate the scalability of your business, it’s essential to do your homework and understand the demand for your product or service in other markets. After all, you can’t just open franchises anywhere and expect them to succeed.
Market research aims to ensure a market for your product or service in the areas you’re targeting to spread your business. The research will involve looking at factors such as population size, income levels, competition, and other factors that will impact your business.
Understand The Legal Requirements
Once your market research gives you the thumbs up and you’re confident that you can franchise your business, the next step is understanding the legal requirements for franchising in your country. In the US, for instance, you’ll need to prepare a Franchise Disclosure Document (FDD), which contains information about your company and the franchise opportunity. Once you are done, you can register the document with the Federal Trade Commission.
Some states have specific requirements, so it’s essential to consult with a lawyer to ensure you comply with the law.
How Will You Model Your Business?
At this stage of the design process, you need to think about the model or structure of your franchise. Here are some of the things you need to consider:
Franchising fees and royalties – You’ll need to decide on the franchising fees and royalties you’ll charge your franchisees. These fees will cover the costs of providing support and training to franchisees. The franchising fee is a one-time payment, while the royalty is a recurring fee, usually a percentage of sales.
Territory – The area you assign to each franchisee is called a territory. When deciding on territories, you need to consider the size of the population, the competition, and other factors.
Register Your Franchise Company
The next step is for you to select a business structure for your franchisor company and register it with the relevant authorities. There are several business structures to choose from, but a corporation or LLC is typically best for a franchisor company.
Market and Sell Franchises
Finally, with your business registered and the legalities out of the way, it’s time to start marketing and selling franchises. This is where you’ll need to put together a sales deck or brochure that outlines the franchise opportunity.
You’ll also need to develop a marketing strategy to reach potential franchisees. This could involve exhibiting at franchise trade shows, advertising online, or using other marketing channels.
Franchising your business is a great way to expand your company and reach new markets. However, before you franchise, there are several things you need to do to prepare, including market research, understanding the legal requirements, and putting together a sales deck or brochure. With careful planning and execution, franchising can be a great way to grow your business.
