NFA Franchise Consultants

Methods to Franchise Your Business

In my over 30 years of experience as a franchise consultant, people frequently want to know if there are different approaches to franchise your business. Here, I will discuss the chief methods used to franchise your business.

There are three main ways to franchise your business. Each entails a different type of Franchise Agreement:

1. Individual Franchise Agreements
2. Area Development Franchise Agreements
3. Master Franchise Agreements

There are pros and cons to each approach taken to franchise your business.

The most popular form used to franchise your business is individual franchising. With this method, the franchisee is allowed to open a single franchise operation. The franchisee often receives a protected territory in which to operate the franchise. If the Franchisor wants to sell additional franchises to the particular franchisee, it can be easily accomplished by signing additional individual Franchise Agreements.

The area development approach to franchise your business provides a method for the Franchisor to sell multiple franchises to a single operator. The area development Franchise Agreement grants the area developer a protected geographic territory in which to open a negotiated number of franchises. The franchisee must open these franchises on an agreed-upon timetable. When you take the area development approach to franchise your business, you may take back the remainder of the territory if the franchisee does not meet the timetable for opening franchises.

If you utilize master franchising in order to franchise your business, you actually give the master franchisee the right to perform many of the functions fulfilled by the Franchisor in an individual franchise program or master franchise program. These responsibilities typically involve franchise sales, franchisee training and on-going servicing of franchises. The master franchisee retains the majority of the funds generated from the initial franchise fees and royalties derived from these franchises.

In certain cases, a particular way to franchise your business may be more suited to different areas or industries. Also, if you franchise your business, you may choose to offer a combination of franchise methods, either at the outset or as your program matures. In any event, if you franchise your business, we strongly caution you to carefully study the various types of franchises in order to determine which one(s) are best for your company.

To be continued


How To Franchise Your Business

In my 30-plus years of experience as a franchise consultant, the question that frequently arises (besides 'should I franchise my business??') is “How to franchise your business?

Sometimes when exploring how to franchise your business, a person might want to short-cut the process by copying the materials from another Franchisor.

Here are some of the many reasons why this is a bad approach to how to franchise your business:

  • Copying someone else’s work doesn’t teach you anything about franchising or how to franchise your business.
  • You have also learned nothing about how to operate your franchise company on an ongoing basis, perhaps the most important aspect of how to franchise your business.
  • If you know little or nothing about how to franchise your business, how do you determine if the company whose materials you copied did a good job?
  • It is unscrupulous - and often unlawful - to steal another person’s work.
  • As a new Franchisor, it is wise to incorporate competitive advantages into your program to attract prospective Franchisees. If you are merely copying another company’s documents, you aren’t building in these benefits.
  • If you do not understand how to franchise your business and how the franchise relationship works, how can you help your Franchisees maximize their sales? Remember, the more successful the Franchisees, often, the more money the Franchisor makes.
  • Having more successful Franchisees typically promotes the sale of additional franchises, adding to the Franchisor’s profits.
  • The term of an average franchise is 10 to 15 years, often with extensions. If you have not gone through the learning process about how to franchise your business, is it wise to enter into a long-term business relationship without understanding all the details and nuances?
  • Employing the services of an experienced franchise consultant when deciding how to franchise your business typically leads to a better structured franchise program that benefits both Franchisees and Franchisor.
  • Utilizing a franchise consultant to help you when deciding how to franchise your business most effectively gives you a source of ongoing assistance as concerns surface.
  • As I have said many times in this blog, when deciding how to franchise your business, you have a lot of different possibilities in terms of the initial franchise fee, amount of the ongoing royalty, size and composition of the territory, profile of Franchisee sought, training program, purchases from the Franchisor, ongoing support programs and other aspects of the franchise relationship. When you copy someone else’s documents, you don’t necessarily get the best answers to these questions for your specific franchise opportunity.

These are the primary reasons that you should consider hiring a professional to help you with the “how to franchise your business” questions rather trying to copy another company’s documents.


Franchising Your Business, Consider This

In my over 30 years as a franchise consultant, I am often asked what to consider when franchising your business. In this blog, I will explore one factor that can lead to success in franchising your business.

When considering whether franchising your business is advisable, study the profit potential for your Franchisees. Ensuring the Franchisees will generate enough income to make their investment worthwhile can make a huge difference in successfully franchising your business.

As you begin franchising your business, remember there are thousands of existing franchise opportunities, in many different industries, providing variety in terms of the following:

  • Types of customers served;

  • Abilities and experience required;

  • Sales and profits generated;

  • Level of initial investment; and

  • Size and attributes of territory.

This diversity allows franchising to meet the needs of Franchisees with different goals and assets. Some franchises require an initial investment of $20,000 and others involve millions of dollars. With one franchise program, the Franchisees may earn $10,000 annually while at another, they net $500,000. Yet, both sets of Franchisees are satisfied, since they are meeting their individual goals. This satisfaction is an important element of franchising your business.

Thinking About Franchising Your Business?

When franchising your business, many of the following considerations may influence the anticipated income for your Franchisees, including:

  • The industry involved;

  • Projected sales and anticipated profits for your franchise;

  • The number of work hours per week required;

  • The unique aspects and competitive advantages your franchise program offers;

  • The investment required to open the business and for continuing operations;

  • The length of time needed for your Franchisees to recoup their investment;

  • The emotional benefits provided by your franchise;

  • The competing franchises available, along with their required investments and average annual revenues and profits; and

  • The type of Franchisee sought, in terms of any experience or certifications needed and the income a person with these qualifications can expect to earn in the open market.

When franchising your business, remember the importance of the emotional benefits provided to Franchisees. Many franchises are highly desirable in spite of not generating a large annual income because they bring satisfaction, for example, a pet-oriented franchise. When franchising your business, also recognize the gratification of owning your own business.


Franchise My Business For Growth!

In my over 30 years of experience as a franchise consultant, the first question people frequently ask me is, “Should I franchise my business?”

Some businesses are better candidates for franchising than others.

Here, I will discuss some of the issues that go into answering the questions “Should I franchise my business?”

There are a number of considerations that may impact whether or not to franchise. While not all of the following questions may apply to your particular company, think about those that do pertain before deciding whether to franchise:

  • Perhaps the most important question to ask is, if I franchise my business, can it be taught to others or it is simply too unique?

  • How much time would it take to train a franchisee and perhaps his/her staff to operate this business?

  • If I franchise my business, how can I structure my program in order for us to generate enough revenue as a franchisor to make it all worthwhile?

  • How can I structure my franchise program so that my franchisees to make enough money to justify their investment of both money and time?

  • If I franchise my business, how can I position my program to attract potential franchisees?

  • Is finding viable sites likely to be too challenging for our franchisees?

  • Have I been in business long enough to prove my concept is viable?

  • If I franchise my business, what type of franchisee support should I offer?

  • Will my franchisees have competitive advantages?

  • If I franchise my business, what would I change about my current operating system?

  • Is it difficult or easy to open and operate a business of this nature?

  • If I franchise my business, will this concept work only in major metropolitan markets? Suburban areas? Rural areas? What other demographic considerations apply?

  • Will my franchisees be required to have special skills, licenses or credentials? If so, what considerations apply to attracting these professionals?

  • If I franchise my business, are the products needed to operate this company readily available or are there supply-side concerns?

  • It is likely that I will be able to sell goods and/or services to my franchisees? If so, what kinds of profits can I anticipate from these sales?

  • If I franchise my business, is it based upon a product, service or technology that may quickly become outdated?

  • Can I utilize my existing team?

These are some of the questions to be addressed when deciding whether to “franchise my business” or not.