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How to Start Franchising Your Business in the United States

So you have been operating your business for some time now, survived COVID and doing great. Now you are ready for the next step, want to grow your business and franchise it. Perhaps you have wondered “how can I franchise my business in the United States” and simply not sure where to begin.  You look on the Internet and find all kinds of things some of which are not even relevant to franchising leaving you dazed and confused. Well, your search is over. We will cover some essential factors you need to take into account when thinking about the franchising your business and what it takes to franchise in the United States.

Evaluate Your Business

The first step in assessing if your business is suitable for franchising is to look at your proof of concept. How long have you been running your business and why in your opinion is it a success? Identify what makes your business unique and draws people to you (take a look at “Questions to Ask Before You Franchise Your Business“). This could be a unique product, exceptional service, a new way of doing something common or a distinctive approach to meeting a person’s needs. When we talk be prepared to share examples that highlight your business’s strengths and unique selling points.

Consider the culture have created within your business. What are you values and your philosophy when running operations? A strong and positive company culture can be a significant asset when expanding through franchising. Potential franchisees will be attracted to a brand that not only offers an easy to follow business model but also aligns with their own values.

Is Your Business Scalable?

What is the type of business you operate and the nature of your business. Is it a professional service that requires licensing (read more about “Can My Business be Franchised if it Requires a License“), a mobile service or a business that requires a physical location? If your business requires a physical location think about what is the smallest footprint (square footage) it can be operated out of and if it requires a lot of build out. For example if you are a retail store ask yourself if you really need 3,000 square feet of space or if it can be operated out of  a smaller 1,200 square foot location.

Let’s touch on flexibility. How flexible is your business model is determined on the what type of business you operate. For example if you operate a business that performs services onsite, perhaps someone can start the business out of their home then later morph into a small office, warehouse or industrial space (take a look at “Franchising a Home Based Business“). We will have to touch on overhead costs, maybe the biggest overhead cost are the vehicles and equipment you use when performing services.  Flexibility in your business can be a key factor in determining how attractive your franchise program will be to others.

How Easily Can Your Business Be Duplicated

Evaluate whether your business can be easily duplicated. Is it labor-intensive or do you need a full staff? Are there things that you make, put together or have to produce in order to sell it. For example if are you selling candles with made-on-the-spot fragrances that requires you to have a small production area, then you will be seeking franchisees who are not afraid of production in addition to sales. And that is okay because there are lots of franchises of that same nature out there already (take for example screen printing shops). 

The ease and efficiency of how you operate your business must also be taken into consideration (read more about “How to Duplicate Your Business“). If you are like most business owners you have figured out the short-cuts, the best way to be efficient and save time.  While not formal, you have probably created certain methods and laid out specific processes that might be a combination of common tasks or a super unique way you go about making sure every aspect of the business runs smoothly. These methods, processes and ways in which you run your business must be trainable. And if you are worried about teaching these strategies with a franchisee afraid that you are sharing trade secrets, worry no more. In the franchise program we build for you there will be lots of protections against a franchisee from stealing what you teach them and using it not only to compete against you but from them in any other business capacity.  The question is  how easy it is to teach and train so operations can be duplicated by a franchisee.  

Are You Making Money?

If you are like most business owners you have figured out a way to streamline costs. Streamlined operations are crucial for controlling costs. After all expenses and overhead is paid ask yourself is your business making money (you can read up on if there a set amount of money or profit you need to make before franchising your business).  The financial health of your business goes way beyond just turning a profit, it  involves constant attention to controlling costs. Think about what steps you have taken to manage material costs, labor costs, advertising and marketing costs. 

Speaking of costs, let’s not forget about overhead costs. This goes to the previous discussion above about flexibility. And even if there is not much flexibility with your business model guaranteed there are still some ways to control overhead. For example if your business requires a storefront, you might be good with a second generation space rather than a new build out.  How about the option of sharing a space with a business already in operation or franchisees jumping into a shared space? Both of which would help minimize overhead costs.

While it is impossible to guarantee the type of profit franchisees may experience or amount of revenues they can generate (because there are way too variables), the idea is if they operate their business with the same attention to detail when controlling costs as taught by you then they too should make money. Is it your savvy and business acumen that got you where you are now so sharing that with someone who is willing to invest their time and resources into your business may pay off in dividends.

What are the Requirements to Franchise My Business in the United States?

In order to franchise your business in the United States, a key requirement is to have a well-crafted Franchise Disclosure Document (FDD) that is not only specific to your business but also adheres to all the federal legal requirements. This document (really it is a packet) outlines the entire relationship between you and the franchisees (learn more specifics about the elements of a franchise disclosure document). It details the structure of your entire franchise program, outlines franchisees responsibilities, your obligations to them, the deliverables you provide and of course if written well affords you protections for your intellectual property and trade secrets.

Steps to Franchise Your Business in the United States

We will begin by protecting your logo and business name through trademarking. Establishing a franchising company is the next crucial step because this will be the company that will be in the business of franchising keeping your current company protected. Then we will dive into what it takes to start your business, costs, build-out, inventory necessary to have on hand, what your training program will look like, if you are providing a territory, how long the relationship will be and what fees the franchisee will be responsible for during their time with you.  Rest assured we will walk you through all the steps to franchise, holding your hand every step of the way and sharing with you best practices in franchising. 

But wait Johnny there’s more.  Yep all the nitty gritty details such as a non-compete, indemnification, reasons for terminating the relationship, what happens if there is a dispute and how that is handled in addition to obligations of the franchisee once the relationship ends. Are you expected to have an idea about any of this, nope. While developing your franchise structure we will explain, coach and mentor you through it all ultimately putting together a franchise program that is specific to you. Templates, we do not use them (see why using templates is bad).  By the time we are done you will not only understand your franchise program but will be able to answer questions about it.

Once your franchise program is well defined, then your FDD will go to one of our franchise attorneys for review (not just any attorney but one of our franchise attorneys take a look at what to be aware of when working with an attorney to franchise a business). From there the franchise attorney will make edits to ensure not only you are well protected but that also you comply with United States federal franchise laws.  In other words, the franchise attorney will scrutinize the franchise program we have put together for your benefit.

Most of the United States are a Non Registration States

Franchising in the United States is quite easy because most of the United States are non-registration states (non-filing states), unlike franchise registration states (see this article on “Franchise Registration States“) where your FDD has to filed and approved by a state examiner. So once we put your FDD together and it has been reviewed by one of our franchise attorneys, then just like that you are good to start offering franchises in your home state (the state where you currently operate your business is considered your “home” state) and all over the United States. Yep, there is no need for any filings with any agency in the United States at the federal level and unless you are in a Franchise Registration State there is no need for a state examiner to review and approve it. After the franchise attorney has reviewed your FDD to make sure that it complies with United States franchise guidelines, laws and regulations (and of course to ensure the document is well written, you are protected, it is fair, etc.) then you are immediately good to go.

Remember franchising is federal and regulated by the Federal Trade Commission (FTC), so once you roll out your franchise in your home state (and provided that your home state is not a Franchise Registration State) that gives you the green light to offer franchises in all the other non-registration states (which means you will be good to go in your home state and 35 other states right off the bat).  Quick side note, there a few of these non-registration states that require a simple notice to be filed and only a couple of these non-registration states that require you have a federally registered trademark to be exempt from any type of filing. If you do not have a federally registered trademark, then a business opportunity application will need to be submitted to that state. But not to worry because there are only a couple of these states throughout the entire United States that have this requirement. We will let you know immediately if you are in one of these states.  

Identify Your Expectations

While there are many benefits to franchising, consider what you expect to achieve through franchising and, most importantly, what you really want out of franchising. If you think franchising will immediately get you out of the day to day business operations, think again. That will take some time. Consider your growth plans, ideal franchisee candidates, growth rate and ultimately your end game (take a look at “What’s Your End Game Franchising May Play a Role”). Whether it is building a legacy, selling the franchise system, going public or another aspiration clarifying your end game is important for identifying your strategic plan moving forward.

Take a minute to really think about who is your ideal candidate to operate your business. Does that person need prior industry experience or can you take anyone from off the street and turn them into a business owner? As far as growth, how many franchises do you think you are going to award each year? And let’s be realistic, remember awarding franchises does not just mean collecting fees and signatures. Its about planning, onboarding and training franchisees every aspect of your business.  And that takes time.

So if the idea of franchising your business throughout the United States excites you and you have identified some of the key factors above, the it might be time to franchise. Give us a call at 1-877-615-5177 and we will be happy to discuss franchising with you and if it makes sense we will further explain how to franchise so we can turn your business into a flourishing franchise system.

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