The Ultimate Guide to Franchising | How to Franchise A Business (2022)

Do you want to learn about franchising, how to franchise your business, and how to know if you're doing it right?

In this guide you’ll learn what it means to franchise a business, how to franchise your business and the steps involved. We’ll also take a deeper dive into the legal requirements of franchising and tips on how to sell franchises.

Introduction: What Does it Mean to Franchise Your Business?

Franchising is a legal and business model that can help you grow your business.

When you franchise your business, as a franchisor, you will be granting franchisees the license and right to open new franchise locations that duplicate your business model, use your trademarks, and benefit from your training, business systems, and on-going support. In turn, franchisees will pay you initial franchise fees, on-going royalty fees, and will work to secure, open, and manage new franchise locations that will increase your overall system sales.

The Ultimate Guide to Franchising | How to Franchise A Business (1)

Franchising is regulated and requires compliance with federal and state franchise laws. When you franchise your business you'll be creating the legal documents, pre-sale disclosures, and operational requirements needed to comply with the franchise laws and sell franchises. The franchise agreement is the legal agreement that creates a franchise relationship and the franchise disclosure document is the pre-sales disclosure document that you'll need to sell franchises.

If you’re interested in franchising your business, you’re in the right place. This guide will provide you with a detailed understanding of franchising, get you on the right track, and help you franchise the right way. If you’re concerned about doing it right and avoiding missteps, you’re not alone – we’re here to help.

Below are links to help you navigate through the topics covered in this Ultimate Guide.

Advantages and Disadvantages of Franchising Your Business

What are the Steps to Take to Franchise a Business?

How Much Should It Cost to Franchise My Business?

5 Strategies to Help You Succeed at Franchising

Developing Your Franchise Sales Marketing Plan

Is Licensing an Alternative to Franchising?

(Video) How to Franchise Your Business [7 Steps]

Do I Have to Work with a Franchise Lawyer?

How Do I Get Started in Franchising My Business?

Advantages and Disadvantages of Franchising Your Business

The advantages of franchising your business include the ability to increase system sales through new locations that are funded, developed, and managed by franchisees. Compared to organic growth that requires continued capital investments and management by your internal team, when you franchise your franchisees will supply the capital and resources needed to grow. You’ll also benefit from royalties and other fees that will be paid to you by franchisees and the ability to improve your supply chain and overall economies of scale as you grow.

The disadvantages of franchising your business include the reduced control that you’ll have over franchise locations, on-going franchisee support obligations, and legal requirements that you’ll be required to comply with. Compared to organic growth where you’re in direct control of your entire operations, when you franchise the success and failure of new locations will depend on the performance of your franchisees. You’ll also need to train and support your franchisees and comply with franchise laws and regulations.

What are the Steps to Take to Franchise a Business?

Franchising your business means that you have taken the legal and business steps to sell franchises, support franchisees, and grow your business. First and foremost, your franchise lawyer will have to prepare and issue a Franchise Disclosure Document that complies with federal and state law. When dealing with states that require FDD registration and filings, you'll also have to register or file your FDD with the state in order to be able to sell franchises.

The Ultimate Guide to Franchising | How to Franchise A Business (2)

The following are the steps to franchise your business:

  • Determine if franchising is right for your business
  • Issue your franchise disclosure document
  • Prepare your operations manual
  • Register your trademarks
  • Establish your franchise company
  • Register and file your FDD
  • Create your franchise sales strategy and budget

1. Determine if Franchising is Right for Your Business

When it comes to franchising your business the most important step is to first determine if franchising is right for you and your business

Like every good business decision, franchising and the decision to franchise your small business needs to align with your long-term goals. As a business owner and founder when you franchise your business you're starting a new journey of learning franchising, entering the franchise industry, and building an organization that, in time, will be training, supporting, and helping future franchises succeed. Some of the factors that you should consider when making this assessment, include:

  • Whether or not your business is scalable with systems that can be adopted by franchisees
  • The profitability of your business and potential future profitability of your franchisees
  • Your business model, industry, and the opportunity for growth
  • Capital available to invest in franchising
  • You personal goals and your interest in learning franchising and growing a franchise system.

Learn more about if your business is ready for franchising and if franchising is right for you.

2. Issue Your Franchise Disclosure Document

The franchise disclosure document, also called the FDD, is the legal document required by the franchise laws and is what you’ll need to franchise your business and sell franchises. Your FDD must be prepared and issued to comply with federal and state franchise laws, be specific to your business, and competitively position the franchise that you are offering. Because the FDD is a legal document it should be prepared by an experienced franchise lawyer.

The Federal Trade Commission requires that every FDD include 23 disclosure items that, together, include information designed to inform prospective franchisees about you, your franchise, and the legal obligations they'll be expected to follow. This includes information about your franchise agreement, franchise fees, royalties, on-going fees, start-up costs, territories, trademarks, financial performance representations, and more. Your FDD will include exhibits of the franchise agreement and all other legal documents that franchisees will be expected to sign when they buy a franchise from you and become a franchisee.

After your FDD is issued, you'll will have to update your FDD annually and, in franchise registration states, you must register your FDD with local state regulators before selling a franchise in the state. When selling franchises, you must disclose your FDD to prospective franchisees 14 days before they sign a franchise agreement or pay any fees.

3. Prepare Your Operations Manual

You will be providing a confidential franchise operations manual to your franchisees and during the franchising process you will prepare the initial version of your operations manual.

The franchise operations manual is the how-to guide for your franchise system and will serve as an important communication tool that allows you to inform franchisees about important system standards and requirements. Some of the primary topics that you will cover in your operations manual, include:

  • Your Brand Purpose, Goals, and Vision
  • Preparing to Open the Franchise Location
  • Product and Service Requirements
  • Designated Suppliers and Inventory Requirements
  • Operations Standards
  • Marketing and Administration Requirements

Since the operations manual is a confidential document, it's not disclosed in you FDD and is only provided to a franchisee after they sign a franchise agreement. Within you're FDD the only thing that will be disclosed about your operations manual is your manual's table of contents and the number of pages.


4. Register Your Trademarks

Because your entire franchise system will revolve around your brand’s trademarks, including licensing them to franchisees, registering your trademarks is an important part of the franchising process.

When you franchise your business, one of the most important legal rights that you will be granting to your franchisees is a license to use your trademarks. Your trademarks, your business name and logo are your brand, and if they are not registered with the United States Patent and Trademark Office (USPTO), they may not be protectable. One of the worst things that could happen is that you have a franchisee spend hundreds of thousands of dollars in a new franchise location and for this franchisee to find out that a local business owner is using the same or similar name, and not being able to stop them. With the proper USPTO registration you will be protecting your trademarks throughout the United States.

5. Establish Your Franchise Company

Your franchise company is the legal entity that will offer and sell franchises and should be formed during the franchising process and before issuing your FDD. Usually a corporation or limited liability company, your new franchise company will be in the business of selling franchises, supporting franchisees, receiving revenue in the form of initial franchise fees and royalties. So it's important that your franchising activity take place in a legally distinct corporate entity.

Forming a new franchise company is also an important step because because it allows you to shield your current business from future franchising obligations and streamlines the FDD financial statement reporting requirements. Within FDD Item 21 franchisors must include audited financial statements of their franchise company. By forming a new franchise company, you'll be starting off fresh with a new company that has very little to no financial activity. This means that your initial financial statements will be easier and less expensive to create.

6. Register and File Your FDD

Before you can sell franchises in the Franchise Registration States (including California, Illinois, Maryland, New York, Virginia, and others) or franchise filing states (including Florida, North Carolina, South Carolina, Texas, and others), you must first file and register within each state.

One common misconception that many new franchisors have is that the FDD needs to be registered with the federal government. Under the franchise laws, FDDs are not registered at the federal level. Rather, they must be registered at the state-specific level within the franchise registration states.

The Ultimate Guide to Franchising | How to Franchise A Business (3)

Once your FDD is complete and is issued, the next step is to register and file your FDD. To learn more about state-specific franchise laws, including FDD registration and filing requirements, check out our interactive franchise registration registration map.

7. Create Your Franchise Sales Strategy and Budget

Once your legal documents are complete, operations manual ready, and FDD issued, creating a franchise sales strategy and budget is critical. Evaluate your target franchisees, target markets, interest in your franchise and a realistic budget for attracting, training, and supporting franchisees. Follow these tips:

  • When setting a budget understand that franchising is all about long-term success and wins and that no matter how much you invest in your franchise sales process, initially, you need time for your new franchise brand to season and take root. What sells franchises is unit level economics and franchisee validation. This means that the success of your initial 1, 2, 3 and 10 franchisees will determine the future growth of your franchise.
  • When budgeting, consider costs associated with building your franchise sales website, building your franchise brand story, franchise PR that will validate your brand story, training and supporting franchisees, and your franchise sales goals. Your costs will directly reflect your franchise sales goals and whether or not your brand has organic reach with customers and others that know about your business and may be interested in buying a franchise.

The franchise development process typically takes between 90 to 120 days to go from where you are today to being a franchisor legally able to offer and sell franchises.

What Comes Next?

After you've franchised your business, the next step is to recruit and on-board qualified franchisees. You'll disclose franchisee candidates with your FDD and on-board qualified franchisees that will sign a franchise agreement, attend training, and open new franchised locations. Once you've turned your business into a franchise, you're just getting started.

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How Much Should It Cost to Franchise My Business?

The cost to franchise your business varies and, depending on who you work with, can range from $18,500 to $84,500. When evaluating the costs it's important to understand the difference between franchise development and franchise sales and how each represents a different stage of the franchising process.

  • The Franchise Development Stage is where you compete the steps to franchising your business. As discussed in this guide, the franchise development stage includes everything from issuing your FDD through registering your FDD and creating your franchise sales strategy. Basically, it's everything that needs to be done before you can start selling franchises.
  • The Franchise Sales Stage is when you start selling franchises. Although this is not a single stage and involves an on-going process of recruiting qualified franchisees, selling franchises and growing your franchise system, its important to plan and budget your franchise sales activities for your first 12 months as a franchisor. Below in this guide we provide a detailed breakdown of the franchise sales marketing channels that you should consider, how to position your franchise brand, and other important tips for selling franchises.

When you evaluate the costs to franchising your business, right now you should be evaluating costs associated with the franchise development stage.

What Determines Big Variations in the Cost to Franchise a Business?

It depends on who you work with and whether or not they are focused on long-term relationships and honest pricing. Be very careful when selecting a lawyer or franchise developer. Many vendors rely on the fact that there are things that you, as a soon to be new franchisor, just don’t know about the process. Some vendors will overcharge you or, worse, they’ll under charge you without you realizing that you are not doing things the right way. Look out for "franchise developers" who claim to do everything in-house, including the legal preparation of your FDD. It’s illegal for a franchise developer to have their own "in-house" lawyer prepare your FDD. For many good reasons, including your legal protection, accountability, and the need to maintain attorney-client privilege, your franchise lawyer must be independent and directly retained by you. You need to know that professionally they stand behind the legal advice and guidance that they provide to you.

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Lower-cost options ($5,000 – $10,000 range) will end up costing you more in lost opportunity and future franchise violations. On the opposite end, higher-cost options ($80,000+) often times deliver a lot of "paper and forms" but really not much value.

Other costs include developing your operations manual. Many of our clients prepare their own operations manual. Most developers typically charge $15,000 – $20,000 for this service.

The Internicola Law Firm, charges from $18,500 to $34,000 for legal representation PLUS franchise development, planning, and support.

Tip: Do your research and look for transparency before engaging a team to develop your franchise. Ask for a detailed proposal and client references!

Learn more about the franchise development stages and how much does it cost to franchise your business.

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5 Strategies to Help You Succeed at Franchising

As you franchise your business, follow these strategies to help you succeed:

  1. Set Realistic Goals.
    Franchising is more of a marathon than a sprint. Set realistic goals for what franchise success will look like for you. What are realistic sales goals in your first year and over the next two, three, four, and five years? The best time to start planning your five-year strategy is before you launch your franchise. The Ultimate Guide to Franchising | How to Franchise A Business (4)
  2. Research Your Competitors.
    You need to competitively position your franchise offering among your competitors. Within your FDD and franchise offering, you will be disclosing important cost metrics that include things like the initial franchise fee, the ongoing royalty rate, franchisee fee obligations, territory sizes, and a broad range of other legal and business factors that will influence the profitability of your franchisee’s operations and their overall rights. Evaluate your competition, understand their metrics, and work with your lawyer to ensure that your FDD is competitively positioned. The Ultimate Guide to Franchising | How to Franchise A Business (5)
  3. Develop Your Franchise Offering for Both Individual and Multi-Unit Sales.
    Having the ability to sell multiple franchise units to a single franchisee is important. Many times, franchisees want to acquire the right to develop and open multiple locations or operate in multiple territories. To be able to offer and sell both individual unit franchises and multi-unit franchises, your FDD must be structured to accommodate the sale of both and requires the development of both an individual unit franchise agreement and a multi-unit development agreement. Developing this dual structure will mean more upfront planning and work but, for the vast majority of industries, launching your franchise without the option to sell multi-unit franchises will put you at a competitive disadvantage.The Ultimate Guide to Franchising | How to Franchise A Business (6)
  4. Make Sure Your FDD Is Compliant for Every State.
    One of the most frustrating things for franchisors is being delayed and not being able to sell in their anticipated timeframe. From the start, your FDD needs to be multi-state compliant. This means it should be ready for registration and filing in every state. How to do this? As mentioned earlier, your lawyer needs to prepare your FDD on a "multi-state" basis. That is, your FDD should include – on a state-by-state basis – required addendums and modifications to make your FDD compliant with various state laws. This is especially important in the franchise registration states. Without this level of multi-state compliance, you risk compliance violations and potential roadblocks to future franchise sales.The Ultimate Guide to Franchising | How to Franchise A Business (7)
  5. Learn Franchising and Get Involved in the Franchise Community.
    Learn more about franchising and get involved in the franchise communities like the International Franchise Association. While your franchise lawyer is developing your FDD he or she should also be helping you learn franchising and get you involved with franchise organizations, networking events, masterminds, and other professionals and suppliers that will be of value after you set up your franchise.The Ultimate Guide to Franchising | How to Franchise A Business (8)

Tip: Speak to other franchisors and always be thinking about next steps.

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Developing Your Franchise Sales Marketing Plan

There are a lot of moving parts involved in selling your first franchise and building a pipeline for ongoing franchise sales. It's critical to develop a marketing plan to cost-effectively sell franchises.

As you get started developing a franchise sales marketing plan, the following are some of the initial questions that you should be answering:

  • What are my franchise sales goals over the next 6 to 12 months?
  • What are the qualities and characteristics of my perfect franchisee?
  • What is the value proposition of my franchise, what makes my franchise unique, and how can my franchise improve the lives of my franchisees?
  • How much money am I going to invest in franchise sales over the next 6 to 12 months?
  • What outside vendors should I be relying on to generate interest in my brand and to help me attract qualified franchisees?
  • Does my website uniquely communicate my brand story and the advantages of becoming a franchisee in my system?
  • Does my website include a lead capture form that encourages prospects to identify themselves and reach out for more information?
  • Do we have a franchisee discovery and conversion process in place to inform and educate the prospect about our brand, the advantages of becoming a franchisee with us, and what success can look like for them?

Answers to these questions will allow you to build the framework for your initial franchise sales marketing plan and the positioning of your brand. These questions are designed to get you started, and what you’ll find is that, over time, your answers to these questions will evolve, change, become more refined, and, ultimately, lead to many other questions and franchise sales development processes.

Next, we’ll dive a little deeper into positioning your franchise brand with the right value proposition. This is one of the most significant marketing tasks that you must engage in. Even if you are working with a marketing team, as the founder or leader of your franchise brand, you need to be actively engaged in this process or you risk making one of the most common and costly marketing mistakes that start-up and emerging franchise brands make.

Position Your Franchise Brand and Build a Franchise Brand Story

Before you spend money on franchise sales marketing, its critical that you properly position your franchise offering. As a successful business owner, you understand the value that you deliver to your customers, what makes your brand unique, and what differentiates your brand and business from your competitors. Now, as you franchise your business, it's important to develop, refine, and communicate what differentiates you as a new franchisor. That is, what is the unique value that you offer to your future franchisees and why should a franchisee buy your franchise and invest in your brand, business, and systems.

So many franchisors, including large franchise systems that have been selling franchises for years, miss the mark on differentiating their franchise brand and communicating a compelling value proposition for franchisees. While the larger franchise brands have the money to get away with making this mistake, start-up and emerging franchisors like you don't. That's because your marketing budget is limited and your marketing dollars need to produce results during the emerging phase of your franchise system. You would think that franchise marketing companies would help start-up and emerging franchise brands avoid this mistake – but they don't. In fact, many times they help to perpetuate it through bad advice. The end result is franchise brands that all sound the same and fail to tell a compelling brand story and founder story.

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If you make this mistake, your marketing dollars will be wasted on cookie-cutter "me too" franchise sales marketing campaigns and media that will either not work or, at best, result in unaffordable franchisee conversion ratios and costs.

Developing your brand story and a unique value proposition for your franchise brand takes time, so get started now. If done correctly, you'll magnetize your marketing that attracts qualified franchisees. Learn more about Building a Compelling Franchise Brand Story and Franchise Sales Website.

Evaluate These Franchise Sales Marketing Channels

Once you've established the value proposition of your new franchise brand and created your brand story, evaluate these franchise sales marketing channels. Some of these channels may be right for your franchise and some may not. Ultimately, you can't rely on just one, and we recommend you develop a good mix based on your brand, your industry, and your franchise sales goals.

  1. Franchise Brokers and Broker Organizations
    Franchise brokers and broker organizations are an important part of the franchise sales process. Franchise brokers are typically part of larger professional organizations and they assist prospective franchisees in finding a franchise opportunity that matches their interests and available capital. We recommend working with reputable franchise brokers to achieve a portion of your franchise sales objectives. The cost of working with a reputable franchise broker far outweighs the fees that you will pay. However, you must be cautious about franchise broker organizations that charge high upfront entrance fees for joining their organization as a brand that their brokers will show to prospective franchisees.
  2. Organic Web SEO (Search Engine Optimization)
    Building your website and web presence is an important long-term task. To get started, add a franchise opportunity page to your current website. The webpage should be focused on the value proposition of your franchise, your brand story and should include a lead capture form where someone interested in buying a franchise can enter their email address and contact information in exchange for more information. Over time, you may develop a separate franchise sales website. Either way, you will need to develop web content that, in time, will help generate organic search engine traffic. Developing unique quality content for your franchise sales webpage or website is a win-win scenario. Although it will take time to generate web traffic from organic search results, the content that you develop will also serve as an important conversion tool for prospective franchisees who find out about your franchise through other marketing channels.
  3. Paid Web (Pay-Per-Click Ads)
    Pay-per-click ads, or PPC, on Google and other search engines is relatively straightforward and there are many vendors that provide assistance in managing AdWords campaigns. As a new franchisor it's important that you evaluate when and how you can effectively use AdWords campaigns in your franchise sales marketing. We do not recommend pay-per-click ads until your brand is seasoned and you have the right conversion systems including, a compelling brand story and value proposition, conversion process, dedicated landing pages, and follow-up drip campaigns in place to maximize the value of your pay-per-click ads. When your franchise is ready for pay-per-click ads, start with limited and targeted campaigns that are focused on a subset of potential franchisee candidates within a targeted geographic area. Additional Recommendations:
    • Use Landing Pages - For all web campaigns, whether Google Ads or paid social media ads, develop and use dedicated web landing pages. Rather than linking paid ads to your home page or to the general franchise sales page of your website, your paid ads should be linked to dedicated landing pages that contain content customized to the ad and that will allow you to track the effectiveness of your marketing campaign. To learn more about landing pages, Unbounce does a great job of explaining what landing pages are and how to structure them.
    • Focus On Collecting Prospect Information - Although selling a franchise would be great, the goal of your paid ads should be to encourage prospects to fill out a contact form to learn more about your franchise. Once you have the prospect’s contact information, you can start a more active drip campaign where you communicate with the prospect, offer additional information, invite them to webinars, and engage in a more meaningful way.
  4. Organic Social Media
    Just like your organic web strategy, creating content and engaging prospective franchisees organically through social media channels like TikTok, Instagram, Facebook, LinkedIn, and Pinterest is cost-effective and critical for franchise sales. Although your organic social media audience may be limited, these marketing channels will serve as an important validation tool for prospective franchisees who learn about your franchise.
  5. Paid Social Media Ads
    As you build your social media presence and your organic audience, paid social media ads represent a great opportunity to reach targeted audiences.Your social media ads should be targeted to subsets of demographics of individuals who share interests, occupations, and skills consistent with perfect franchisees for your system.
  6. Franchise Public Relations
    Franchise public relations involves promoting your franchise through third-party media channels that that include news and information about your franchise, the success of your franchisees, and the value that you offer. PR-driven media appearances can generate interest in your franchise brand and build credibility with franchisee prospects.Although PR appearances are, technically free, it’s still pay-to-play as you will need to hire and pay a good public relations agency to get you media exposure. When hiring a PR agency, it’s important to establish clear expectations as to the types of media placements that the agency can deliver for you.
  7. Franchise Influencers
    Franchise influencers are credible authors, web content curators, and bloggers who have developed a specialized expertise and a following within the franchise community. These influencers offer valuable and credible information to prospective franchisees, and within certain parameters offer assistance in providing exposure to franchisors and franchise brands. For great insight into the work of one of the best franchise influencers, check out The Franchise King®.
  8. Online Franchise Portals
    Online franchise portals are websites that list many franchise brands and position themselves as a resource for individuals looking for franchise opportunities. These online portals use organic SEO and pay-per-click ads to get visitors to their website. From there, prospects are encouraged to enter their information and are shown various franchise brands and opportunities. Online portals make money by charging franchisors like you a fee to be listed on their website and fees for you to buy prospective franchisee leads from the portal. Currently we do not recommend online portals for new franchisors.

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Is Licensing an Alternative to Franchising?

No, licensing is not an alternative to franchising. Sometimes, either based on bad legal advice or a lack of information, business owners enter into a license agreement believing that it is not a franchise, and therefore they do not have to go through the franchising process.

Here’s the catch: within every franchise is a license. The definition of what "creates a franchise" is so broad that license agreements end up triggering franchise liability and serious legal issues. If the business relationship that you are entering into includes (a) the license of a trademark, (b) the payment of a fee, and (c) an agreement where you will have a level of control over how someone operates their business, the business relationship is a franchise and you will need to comply with the franchise laws. Learn more about licensing versus franchising and the difference between them.

If you have already sold licenses, the good news is you can convert your license system to a franchise system.

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Do I Have to Work with a Franchise Lawyer?

If you are going to franchise the right way, you need to work with a lawyer who specializes in franchising and who is experienced in helping business owners like you turn a small business into a franchise.

A good franchise lawyer will be able to help you through each phase of the franchise development process and will provide you with franchise development insights and strategies that have worked for other brands. He or she will also help you avoid the mistakes and pitfalls of franchising that many start-up franchisors don’t know about or, unfortunately, find out about too late. Be careful because many franchise consultants pretend to be lawyers or have lawyers on their staff. However, what these consultants are really doing is practicing law illegally and harming many unsuspecting start-up franchisors who don't yet realize the legal importance of their FDD and future franchise agreements.

There are some really good franchise law firms out there. The right lawyer for you should understand your brand, believe in your goals and vision, and have the systems in place to guide and help you franchise the right way. Learn more about selecting the right lawyer in our Guide to Selecting a Franchise Lawyer.

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Can a Franchise Developer or Consultant Prepare My FDD Instead of a Franchise Lawyer? No. Your FDD is a legal document that requires the integration of federal and state-specific franchise laws and regulations and should only be prepared by a franchise lawyer directly hired by you.

If you have done a Google search about franchising your business, chances are you have come across search results that not only include franchise lawyers but also franchise consultants and franchise developers. You may not even notice a difference – and this may be intentional on the part of the consultants and developers, who attempt to appear as "one-stop shops" that also offer legal services. Franchise consultants and franchise developers are not franchise lawyers and they can’t provide you with legal advice; they can’t have their "in-house lawyers" provide you with legal advice; and they don’t possess the necessary training and expertise to prepare your FDD, register your franchise offering, and legally protect your brand. Your franchise lawyer should work directly for you and be directly accountable to you.

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How Do I Get Started in Franchising My Business?

By reading this guide, you’ve already taken the first step! Now that you have a solid foundation as to what franchising is all about and the steps involved, start building the right team to help support and guide you in franchising your business.

The Internicola Law Firm is dedicated to helping small businesses grow through franchising and we would be glad to learn more about your business, your growth goals, and if franchising is right for you. Learn more about our services to franchise your business and how we help you create a winning franchise or call us at (800) 976-4904.

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What are the steps to take to franchise a business? ›

How to Franchise a Business
  1. Make sure your business is ready to franchise.
  2. Protect your business's intellectual property.
  3. Prepare a financial disclosure document (FDD)
  4. Draft a franchise agreement.
  5. Compile an operational manual for franchisees.
  6. File or register your FDD.
  7. Set a strategy to achieve your sales goals.
2 May 2022

What does it mean to franchise a business? ›

The International Franchise Association defines a franchise as a “method of distributing products or services involving a franchisor, who establishes the brand's trademark or trade name and a business system, and a franchisee, who pays a royalty and often an initial fee for the right to do business under the ...

What is a franchise business examples? ›

Restaurants, hotels, resorts, auto rental businesses, shipping companies, gyms, tax preparation services, and cleaning companies are all business types that have developed into successful franchises.

When considering a franchise what are the most important things to you? ›

Among the points IFA recommends for investigation are: The type of experience required in the franchised business. The hours and personal commitment necessary to run the business. The track record of the franchisor, and the business experience of its officers and directors.

How do I become a successful franchisor? ›

How Do I Make My Franchise Successful?
  1. Make sure you have enough money.
  2. Follow the system.
  3. Don't neglect your family and friends.
  4. Be an enthusiastic franchisee.
  5. Recruit the best and treat them with respect.
  6. Teach your employees.
  7. Give customers great service.
  8. Get involved with the community.

What are the advantages of franchising? ›

Advantages of buying a franchise

You don't necessarily need business experience to run a franchise. Franchisors usually provide the training you need to operate their business model. Franchises have a higher rate of success than start-up businesses. You may find it easier to secure finance for a franchise.

What is franchising in simple words? ›

A franchise (or franchising) is a method of distributing products or services involving a franchisor, who establishes the brand's trademark or trade name and a business system, and a franchisee, who pays a royalty and often an initial fee for the right to do business under the franchisor's name and system.

Is franchise business A Good Idea? ›

The biggest positive attribute of a franchise business is venturing into already established business. Your risks of growth and profit related risks are lowered down to quite a good extent. It helps a lot specially if you do not have previous business experience.

What is the most common type of franchise? ›

The most common type of franchise is the business format franchise. This type of franchising facilitates the expansion of the franchiser business by allowing individuals to buy a business with an established brand name.

What is the most successful franchise? ›

Key Takeaways
  • The highest-grossing movie franchise of all time is the Marvel Cinematic Universe.
  • The top two highest-grossing franchises, the Marvel Cinematic Universe and Star Wars, are both owned by Disney.
  • Four of the five highest-grossing franchises are based on either a series of comic books or a series of novels.

What is a franchise owner called? ›

The main company, or franchisor, can expand by offering independent business owners their name, trademark, and established business. They help the new owners with the launch as well as with training on how to run the business. In exchange, the franchisor is paid royalties and fees by the franchisee.

What are franchise opportunities? ›

Franchise opportunities provide entrepreneurs a chance to start their own business without many of the risks associated. For many, this is an ideal arrangement where the up-front costs to the owner are specific and predetermined, and the owner benefits from the franchisor's established business model and brand.

How do you identify a good franchise opportunity? ›

Before choosing a franchise, take the time to consider these 10 vital signs that the company is the right fit for you.
  1. Proven sales record. ...
  2. Growing market. ...
  3. Competition. ...
  4. Repeat business. ...
  5. Healthy living. ...
  6. Upsell opportunities. ...
  7. Profitable business model. ...
  8. Personal interest.

What should we know before investing into a franchise business? ›

Count your money

Look beyond the minimum requirement for buying a franchise, usually listed as the franchise fee and the cost of equipment. Getting a franchise up and running can involve hefty marketing costs and the need to survive on break-even books, or a period of net losses, before your business catches on.

Which statement about buying a franchise is most accurate? ›

Which statement about buying a franchise is most accurate? Before purchasing a franchise, the buyer should carefully evaluate the franchise, the franchisor, his or her own situation, and the nature of the market.

What makes a good franchise owner? ›

Potential franchise owners should feel confident about their investment, the brand, and their ability to manage and run the business. Being confident is not only motivating but also can instill trust, facilitate respect and lead to success.

How successful are franchises? ›

A five-year study by the franchise consulting firm FranNet reported that 92 percent of their franchise placements were still in business after two years and 85 percent after five years. Because yes, sometimes franchise businesses can rise and fall like independently owned companies.

Can anyone succeed as a franchisee? ›

Franchises offer great business opportunities for new entrepreneurs looking to start a business at less risk and lower startup costs. Nonetheless, in order to be successful in the franchising world, you need to possess strong work ethic, excellent customer service, strong leadership, and attention to detail.

What is the main purpose of franchising explain? ›

Franchising is a well-known marketing strategy for business expansion. A contractual agreement takes place between Franchisor and Franchisee. Franchisor authorizes franchisee to sell their products, goods, services and give rights to use their trademark and brand name. And these franchisee acts like a dealer.

What are the benefits and risks of franchising? ›

What Are The Advantages And Disadvantages Of Owning A Franchise?
  • Advantage #1: Proven Business Model & Operating Procedures. ...
  • Advantage #2: Access To Training & Support. ...
  • Advantage #3: Start Generating Income Quickly. ...
  • Disadvantage # 1: Rules And Strict Guidelines. ...
  • Disadvantage #2: Reputation.

Why we need to study franchising? ›

Being part of a franchise brand gives franchisees a solid team they can rely on, share best practices and business techniques to more often weather unexpected economic or societal change better than independent business owners. This is the power of a successful entrepreneurial network!

What are the main features of a franchise? ›

  • 7 key traits of a successful franchise system. Sarah Stowe Oct 28, 2015. ...
  • Alignment. ...
  • Commitment. ...
  • Mutual interest. ...
  • Communication. ...
  • Accountability and responsibility. ...
  • Professional conduct. ...
  • Pre-agreed dispute resolution.
28 Oct 2015

Do franchise owners have to work? ›

Owning a franchise unit can be demanding, requiring work of 60 to 70 hours a week, but owners have the satisfaction of knowing that their business's success is a result of their own hard work. Some people look for franchise opportunities that are less demanding and may only require a part-time commitment.

Why franchising is a smart business solution? ›

Franchising allows companies to compete with much larger businesses and saturate markets before their competitors can respond. Franchising can help a business grow on both sides of the fence. The franchisors' principal benefit is that they can expand more entities rapidly across different locations.

How do I prepare for a franchise interview? ›

How to Prepare for the Franchise Interview
  1. Be Aware of Potential Challenges. Do your homework. ...
  2. Analyze Your Financial Situation. ...
  3. Talk to Current Franchisees. ...
  4. Questions for the Franchisor. ...
  5. A Mutually Beneficial Relationship.
5 May 2021

Is it profitable to own a franchise? ›

Buying a franchise might seem like easy money, but those royalties and fees will quickly cut into profit margins. The majority of franchise owners earn less than $50,000 per year.

Why franchising is the quickest and most successful way to become an entrepreneur? ›

It offers success - first time

Franchises are established businesses with a tried and tested system, so investors don't have to experiment with different strategies before seeing success. Franchisees can hit the ground running, without the fear and uncertainty of starting a business from scratch.

What is pure franchising? ›

Pure Franchising:

' In other words, this type of franchising provides the franchisee with a complete business format including license for a trade name, the product or service to be marketed, the physical plant, methods of operation, a marketing strategy plan, a quality control process, and so on.

What are the reasons to grow your business? ›

Business Growth – Analyzing 9 Reasons Why Businesses Want to Grow
  • Survival. ...
  • Increase in sales. ...
  • Increase in market share. ...
  • Greater power to control the market. ...
  • Increase in profits. ...
  • Economies of scale. ...
  • Protection from the risk of takeover. ...
  • Increased status and recognition.
2 Jul 2021

What is the most popular franchise industry today? ›

Food and Restaurant Franchises

To no surprise, the most popular franchise industry is Food and Restaurant! This industry offers so many different opportunities and niches - everything from fast food and coffee shops to diners and cafes, etc.

What are the advantages and disadvantages of owning a franchise? ›

Benefits and Cons of Franchising: A Summary
Advantages of buying a franchiseDISADVANTAGES OF BUYING A FRANCHISE
Brand awareness already exists for the business, making it easier to draw in an audience and generate profits.Initial investments can be high, and some companies require payment with non-borrowed money.
5 more rows
30 Aug 2021

Why do franchises fail? ›

The most frequent causes: lack of funds, poor people skills, reluctance to follow the formula, a mismatch between franchisee and the business, and -- perhaps surprisingly -- an inept franchiser.

What are the two types of franchising? ›

There is a wide variety of types of franchise ​structures used in the industry today. There are two main types of franchising, known as Product Distribution Franchising (Traditional Franchising) and Business Format Franchising, which are conducted under a variety of franchise relationships.

How much money do you need to open up a franchise? ›

How much does it cost to start your own franchise? Franchise startup costs can be as low as $10,000 or as high as $5 million, with the majority falling somewhere between $100,000 and $300,000. The price all depends on the industry, location and type of franchise.

How do franchise owners get paid? ›

A franchise owner makes money through profits received from sales and service transactions. This is generally the left-over amount of money received from revenue after overhead costs are taken out.

How do you find a franchise? ›

8 Steps to Finding the Right Franchise
  1. Define your goals. ...
  2. Identify some franchise options. ...
  3. Make initial contact. ...
  4. Identify their processes. ...
  5. Evaluate the franchise documents. ...
  6. Interview existing franchise owners. ...
  7. Attend discovery day. ...
  8. Execute the franchise agreement.
23 Dec 2016

What information is included in a franchise agreement? ›

The franchise agreement outlines the costs of franchising ownership. All franchises charge fees. These include the initial franchise fee, as well as ongoing fees such as the monthly royalty fee, advertising or marketing fee, and any other fee. Agreements can include late fees and interest.

How do you write a business plan for a franchise? ›

Writing a franchise business plan: 11 things you need to include
  1. Introduction. Give your reader a brief overview of what your franchise is and how you plan to run it.
  2. Business structure. ...
  3. What your product or service is. ...
  4. Market analysis. ...
  5. Operations. ...
  6. Marketing plan. ...
  7. Premises. ...
  8. Financing.
14 Dec 2018

How do you operate a franchise? ›

So if you're thinking of franchising a business or just starting out, keep these universal key steps in mind.
  1. Be Passionate About Your Product Or Service. ...
  2. Find Out Whether Your Community Needs This Franchise. ...
  3. Make Sure You Have Plenty Of Capital. ...
  4. Hire The Right Team. ...
  5. Pay Attention To Your Customer Service And Reputation.
5 Feb 2019

What does one have to do to become a franchise owner? ›

Here are the five steps to becoming a franchise owner yourself.
  1. Do every last bit of your homework. Just because you want to buy into an existing chain doesn't mean you don't have to do a massive amount of research. ...
  2. Incorporate or form an LLC. ...
  3. Inquire and apply to the franchisor. ...
  4. Obtain financing. ...
  5. Everything else.
19 Jun 2020

Which of the following is considered an attractive characteristic of franchising? ›

A franchise is typically attractive because it offers training, financial assistance, and operating benefits.

Can a franchise be formed as a sole proprietorship? ›

Yes, a franchise can be a sole proprietorship.

Therefore, the franchisor operates on its own after paying off the required fee.

What is an advantage of franchises quizlet? ›

1. Franchising provides a better mechanism for selecting and offering incentives to outlet operators than salaried employees. 2. Franchising offers an efficient mechanism for obtaining human and financial resources for rapid firm growth.

What is involved in a franchise agreement? ›

The franchise agreement should outline the rights and obligations of both the franchisor and the franchisee. The main purpose of this contract is to protect the intellectual property of the franchisor.

How can I franchise my business in India? ›

To take a franchise, you can either directly contact the parent company or approach the various platforms available for franchiser-franchisee exchange, such as Franchise India, Way2Franchise, Franchise Bazaar and Franchise Mart. Any of these will help to organise a meeting between you and the company of your choice.

How do you know if a company is Franchisable? ›

5 signs that your business is franchisable
  1. Differentiation. Is your business unique? ...
  2. Continuing value. Can your franchisee do without you in the long run, or will they continue to need you even after they know how to operate the business? ...
  3. Return on investment. Are your stores profitable? ...
  4. Credibility. ...
  5. Capital.
5 Oct 2014

How does franchising work UK? ›

Franchising is when an established business allows a third party the right to operate using their trade-name, either through their manufacturing, distribution or sales channels. This is usually in return for a one time franchise fee, plus a percentage of sales revenue.

How important is a franchise agreement? ›

A franchise agreement protects both sides. It protects you as the franchisee and also protects the franchisor brand. When buying a franchise you will be making a large financial investment. A signed agreement gives you rights to help safeguard your investment in your business.

How long is a franchise contract? ›

The typical length of a franchise agreement is between five and 20 years. A common reason for this general length of time is often the size of the franchisee's initial investment, though market conditions and the type of franchise can also be factors.

How do you become a franchise owner? ›

Here are the five steps to becoming a franchise owner yourself.
  1. Do every last bit of your homework. Just because you want to buy into an existing chain doesn't mean you don't have to do a massive amount of research. ...
  2. Incorporate or form an LLC. ...
  3. Inquire and apply to the franchisor. ...
  4. Obtain financing. ...
  5. Everything else.
19 Jun 2020

How can a business increase its franchise? ›

Here are 10 innovative approaches to improve your franchise business:
  1. Pick the correct business for you. ...
  2. Improve your business aptitudes. ...
  3. Market constantly. ...
  4. Take control. ...
  5. Have an instructor's mentality. ...
  6. Cultivate good franchise connections. ...
  7. Speak up and generate better quality leads. ...
  8. Build a solid brand Identity.
29 Sept 2020

What are the 4 ways to become a franchisee? ›

4 ways to become a franchisee
  • Figure out your passion and skill set. Buying a franchise business shouldn't just be about facts and figures. ...
  • Prepare to buy-in. ...
  • Investigate franchise brands. ...
  • Speak to experts and existing franchisees.
29 Nov 2019

Is it profitable to franchise your business? ›

Buying a franchise might seem like easy money, but those royalties and fees will quickly cut into profit margins. The majority of franchise owners earn less than $50,000 per year.

What do you call the owner of the business being franchised? ›

Franchising is where a person(franchisor) who has developed a certain way of doing a business gives another(franchisee) the right to use that business model in exchange for a fee. The business has built a certain reputation and has brand recognition.

Is it possible to franchise all the businesses? ›

Even if franchising is an effective means of meeting a company's objectives, not all businesses are ready to franchise. The better prepared and positioned a company is to expand through franchising, the better the chance of establishing a solid network of franchisees and protecting the brand.

How much money do you need to start franchise? ›

How much does it cost to start your own franchise? Franchise startup costs can be as low as $10,000 or as high as $5 million, with the majority falling somewhere between $100,000 and $300,000. The price all depends on the industry, location and type of franchise.

Do franchise owners make money? ›

Instead, both a franchise owner and a franchisor make money through the business' success. A franchisor makes money from royalties and fees paid by the franchise owners. A franchise owner makes money through profits received from sales and service transactions.

What is franchising in simple terms? ›

A franchise (or franchising) is a method of distributing products or services involving a franchisor, who establishes the brand's trademark or trade name and a business system, and a franchisee, who pays a royalty and often an initial fee for the right to do business under the franchisor's name and system.


1. The Ultimate Guide for Franchising a Business
(The Franchise Institute Pty Ltd)
2. Franchise Funding: The Complete Guide
(Franchise Secrets)
3. How To Start A Franchise Business? Franchising Business Strategy
(Franchising School)
4. How To Sell Franchises: A Guide For Franchisors
(Franchise Secrets)
5. What is the Franchise Operations Manual?
(The Internicola Law Firm, P.C.)
6. How Franchising Works : Mcdonalds Franchise Example
(Tariq Johnson)

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