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How to Franchise Your Small Business

Start Your Own Franchise

By Demir Barlas


What do McDonald's, Subway, Ramada, GNC and Jani-King have in common? They're run as franchises, which means anyone can buy the right to own and operate one of their outlets. Franchising is an excellent plan for some small businesses, particularly those whose distinctive business models can be easily duplicated and scaled. Curious whether or not your own small business could serve as the model for a franchise? Read on to find out how to go about becoming a legally recognized franchisor.

Who Should Franchise?

Many kinds of businesses have experienced franchise success. What these blue-chip franchises have in common are the following characteristics:

Ambitious Spirits. Franchising is for ambitious managers who want to grow their business. If you're happy with the current state of your business, and lack the energy or ambition for a sustained run at growth, you're better off not franchising.

Management Aficionados. You must have a focused interest in management to do well as a franchise. If you're a business owner who's better at doing something (such as installing cabinetry), franchising may not be for you. But if you envision yourself doing business on a larger scale, and feel that you have the skills and sense to get it done, give it a go.

Innovators. A successful franchise has to innovate in some way. If you can't bring something new to the table, franchising isn't for you. But if you've created a brand-new dining experience, perfected a software-based business model for a traditional industry or otherwise shaken up your niche, franchising is an attractive opportunity.

Proven Operators. Subway began to franchise when it had only 16 stores. However, each of those stores was turning a healthy profit. The store's owners proved that their concept worked and their stores made money. Therefore, there was every reason to believe that the same factors that made 16 stores profitable would apply to 16,000.

Strong Teams. You need excellent people on your team because no one person can simultaneously define and execute a franchise vision. Also, no franchisee will invest in a franchise with a one-person staff. It simply isn't credible. So until you build a strong team, even if it's only three people, don't bother franchising.

Experience-Based Businesses. No matter what kind of product or service you provide, you'll greatly improve your franchising chances if you've succeeded in retailing a particular and predictable experience to your customer base. This is one of the hallmarks of not merely franchise success, but also business success in general, because consumers more often buy experiences than goods or services. Ask yourself candidly whether your business provides a distinct experience (be it in ambience, decor, service, product delivery, etc.), because this will help to differentiate you from the vast number of franchises already in operation.

If your business exhibits several of these characteristics, franchising may be an appropriate course of action.

How to Franchise

Get a Franchise Consultant. If you have the money and want to maximize your chances, approach a franchise consultant to tweak your plan. Consultants have seen it all before and can spare you the pain of reinventing the wheel.

Get a Franchise Attorney. As a franchise, you'll have to prepare a number of business and legal documents (such as the Uniform Franchise Offering Circular, or UFOC) for perusal by potential franchisees, and for state and federal government entities.

Get to Marketing. Now that you've decided to franchise, your highest-priority task is convincing potential investors that they should become your franchisees. This is something a franchise consultant can help you with. Read other franchise prospectuses to see how franchises pitch themselves to the marketplace, and bear in mind that you must follow FTC rules in the creation of a prospectus.

Redefine Your Role. Until now, you may have been deeply involved in the operational side of your business. As the CEO of a franchise company, you have to leave behind the sole proprietor mind-set. Now your role is to drum up excitement among potential franchisees. This means that you have to redirect your time toward marketing activities: supervising the UFOC, attending speaking events to acquaint the market with your franchise and tapping connections provided by friends and family.

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