How to Franchise Your Business

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Do you have a running business which makes good money for you? Do you want to make more money without investing more money and time? Do you wish to know how to franchise your business and increase your turnover?

If you are thinking of franchising to expand your brand or operations, experts would recommend that, first you should consider whether your business is a good candidate for franchising. For that, your business should have a proven, successful and transferable system.

Basics for franchising a business

To be sure that your operating system, trademarks or service marks and marketing system are franchisable, you must be positive that you offer a good product or service, your system is profitable, the business can weather bad times, your method can be taught to others, and maybe you got inquiries whether you would like to franchise your business.

If you are certain that your system or brand is franchisable, and have decided to pursue your expansion plan, you must be prepared to meet legal, accounting and system requirements to start on this business.

Documenting your business

According to eSmallOffice, the two primary documents that you would have to prepare are the Uniform Franchise Offering Circular, a standard disclosure document, and the Franchise Agreement. The first is required by the Federal Trade Commission for all companies wanting to sell franchises. The second is a legal contract that contains the terms of a franchise agreement. Both documents follow a certain general format.

As part of the disclosure requirement, you would need a prepared audited financial statement for the franchise company, so that prospective buyers of your franchise will properly be informed of the business they will be getting into.

And importantly, you would need to have a documented system that franchisees could use to run a business efficiently. The system will include training programs, marketing plans, and sales systems.

For specific requirements to start a franchising business, check on the legal system of the state you want to set up your operation. Different states have different requirements in approving an application to franchise.

Handling litigations

To prepare the legal requirements for registration, you will need a franchise attorney. You would also need an accountant to prepare your financial statements and give you advice on the structure of your business -- whether you would decide to set up another company to franchise your concept or continue with your existing business entity as franchise company. Also, you might need a franchise business advisor to develop your system. Experts recommend that if you get a business consultant to help you develop your systems documents, you choose a consultant with a specialized franchising background.

Branding your business

Aside from these documents, it is also advisable for you to secure the protection of your name, product, or service. Register your trademarks or service marks to guard them from intellectually property violations, and to determine you are not infringing on others’ yourself. And of course, just like for any business, a business plan is a must. Your plan should include how you envision your company would be several years from now, and how you intend to make it so.

How much do you need to start franchising your business

Regarding capital, an advisor’s realistic estimate of a startup cost for a franchising business would be $500,000 to $1,000,000, according to Jeff Elgin of Entrepreneur.com. And money won't come in until about three to five years after you've set up the business, he says.

For more ideas on how to proceed on a franchising business, visit the Web site of the International Franchise Association, the industry trade association for franchising.

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1 Comment

dilip said on April 24, 2010
My business is educational & placement consultancy. gaya(bihar) India...