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Are you ready to franchise your business?

When it comes to business expansion, franchising comes with less capital risk but more limited returns.

By Allan D.J. Dick

You are operating a business. It has received a positive reception in your market and is turning a profit. Perhaps you are considering expanding by opening a second location, or an admiring customer tells you that they too would like to open a second location in another place. You have heard about franchising and are wondering if it is a potential avenue to expand. If a business owner can answer the following 10 questions affirmatively, they are ready to franchise.

Do you understand the key differences between operating a business and operating a franchise? 

When you started your business, you assessed the cost, ongoing expenses, and potential profit.  You then made the investment and experienced operating results. Your franchisees will be doing the exact same. They will assess their investment level and whether they will turn an adequate profit.

You also must do the same analysis of your franchising business. You will need to assess how much money you will be investing to start off, what it will cost to maintain operations, and what revenues you will receive. As a franchisor, you will be focused on finding new franchisees and locations, managing the supply chain, supporting and overseeing franchisees, and managing the statutory compliance obligation as a franchisor, all while keeping your brand current and of interest to customers. You may still be managing and operating your corporate location(s) and will also need to decide if you will enjoy these aspects of your day-to-day life.

It is important to create an operations manual so a business can be replicated and someone can be trained to operate it similarly.

Do you own a valid trademark? 

The goodwill in a brand is associated with its trademark(s)—the trade name and any associated logos. If they are not already, you will need to apply to have them registered. The registration process is relatively easy, though it currently takes several years for a trademark application to be approved. The trademark will need to be registrable as there are rules governing that. One of the first tasks is to assess whether, in fact, the trademark can be successfully registered. Registration provides nationwide protection for trademarks which will be associated with the franchise system.

Can your business be replicated? 

The notion of franchising is a system for operating a business that can be replicated and to train someone to operate it similarly.

Prospective franchisees want to be identified with the brand and operate the same business which is successful. You will need to reduce the details of your systems to be contained in an operations manual. It is time-consuming to create this manual which is expected to be digitized.  Hiring a consultant to prepare your manual can be expensive as well.

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