Franchising can be an excellent way to grow a business, but it is very important to prepare well before expanding. When someone franchises a business, they are expanding their already successful business model to several other locations. The business owner is also called the franchisor, and it is up to the franchisor to create an agreement with the franchisee that will allow them both to make the new location a success.
There are four different types of franchises, including a job franchise which takes place when a business offers a service in the franchisor’s name; a distribution franchise, which takes place when a business offers services that are related to their products, a business format franchise, which takes place when the franchisor provides business models that are established, and an investment franchise, which involves a large business that offers a service, like a hotel. Business owners need to determine which type of franchise is right, depending on the industry and company size. Franchising a business usually takes about four months, and it can cost between $20,000 to $100,000 or more, depending on the industry and location. Once a business owner decides to franchise their business, it is time to make sure the franchisees are ready to run their new businesses as independent contractors.
The first thing a business owner who is ready to franchise should do is make sure their business is ready by asking some important questions about the business. These questions include things that have to do with finances and how much time the owner has available to devote to each new franchisee. These questions will help new franchisors determine their weaknesses and if franchising is the right choice to make for expansion. The next thing a business owner who wants to franchise should do is protect their intellectual property, while also being sure to allow each franchisee to brand their franchise in a way that encourages growth. After this step, certain legalities come into play, such as disclosure statements and franchise agreements. A franchise can be very beneficial if business owners take the time to prepare and make sure it is the best decision for their company.