Franchising is a way to expand your business or concept to multiple locations by licensing others to use your brand and know-how in exchange for paying you fees and receiving support services from you.
Franchising is the business relationship between a “franchisor” (the party that owns the brand name and is granting the franchise) and a “franchisee” (the party that is obtaining the right to use the brand name at another location). The franchisor permits the franchisee to sell certain products or services to consumers under the franchisor’s brand name in a way that’s consistent with the franchisor’s operating standards, and in return, the franchisee pays fees to the franchisor. Typically, the franchisor licenses its brand name (which may include trademarks, copyrights, and other intellectual property) to the franchisee and provides site selection, training, marketing, and other support services to the franchisee to help the franchisee succeed in operating his or her outlet and grow the brand as a whole. In return, the franchisee pays to the franchisor one-time and periodic fees (e.g., an initial franchise fee for training, weekly or monthly royalties based on sales, marketing fees, and technology and support fees).
In successful franchise systems, franchisors use other people’s money to expand the business concept and brand.
Should you franchise?
Franchising takes time, money, and a commitment to your franchisees. Your franchise system must be registered in certain states, and in all states, you must provide a detailed Franchise Disclosure Document to franchisees, along with having contracts in place with franchisees. Franchising is a different business than the one you are operating today—rather than selling products and services directly to consumers, you are now selling franchises (and everything that goes along with a franchise, including the brand, system, and guidance) to potential franchisees, who then in turn sell products and services to consumers. Your consumer is now the franchisee. Learn more about the Pros and Cons to Franchising.
Can you franchise?
Not every business can (or should) be franchised. For some, it may be premature to start franchising. But others businesses that have certain characteristics may be ripe for franchising. Determine the franchise feasibility of your business with our detailed Franchising Feasibility Test and then contact the Larkin Hoffman Franchise Team for a complimentary Initial Franchising Consultation.
How do you franchise?
From a legal perspective, franchising also requires strict compliance with complex state and federal laws that govern the registration and disclosure of franchise offerings, advertisements for the sale of franchises, and your ongoing relation with franchisees. The Larkin Hoffman Franchise Team can walk you through the entire process of franchising. Learn more about the Steps to Franchising.
From a business perspective, franchising requires thoroughly analyzing and documenting your current business processes and operations. The franchisor will also need to develop the franchise system infrastructure, which may include one or more sales people (who sell franchises), new technology systems (such as point-of-sale systems with centralized accounting access), and marketing materials promoting both the sale of franchises and the products or services that the franchisees will offer for retail (if the franchisor will conduct its own marketing on behalf of franchisees).