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Franchising a Small Business: The Next Step in Expansion

August 3, 2022
Phil Cohen

Franchising a business involves selling the rights to open another location of the same company to another person. If a business owner is properly educated on the strategies that will allow them to franchise well, it can be the turning point for a business looking to become a national corporation. This can be a very profitable venture for small business owners looking to turn their business into a chain, but can also be difficult to pull off successfully. Utilizing the right tactics is essential when expanding a local company, and so is hiring the right professionals to help with the process. Here are the most important things to consider when getting ready to franchise a small business.

How to Franchise a Small Business Safely and Successfully 



When to franchise a small business

Although franchising a small business can be very profitable for the original owner, there are multiple things that must be considered before making the final decision to go through with the expansion of a company.

First and foremost, the owner should be having a significant deal of success in the single location of the business before signing a franchise agreement. If the business is performing at a low or even mediocre level when it is not franchised, trying to expand it to multiple locations is almost never going to yield improved results — the concept must be able to be copied by others. If the owner of the original business offers a unique service that simply cannot be learned or performed by anyone else, it will be impossible for franchisees to successfully operate the business and therefore pointless to expand.

Additionally, the person who is franchising their business must be willing to take on less of a store-operator position and more of a businessman role, as they will now be in charge of the dealings of multiple locations and will have to deal with managing them accordingly. This also means that they must be okay with having another person manage part of the company, as the people who become franchisees will be the managers of their store locations and the original owner will not be calling all of the shots.

So long as these changes and conditions can be met, expanding a small business into a franchise can be a great way to increase both profit and scope of influence. Deciding to franchise a business also means expanding it to a point beyond the individual owner’s control. The process of invoice factoring can help small businesses expand, hire more workers and grow operations without taking on additional debt.



How to turn a business into a franchise

  1. Have a plan

In order to ensure that a small business franchising operation goes successfully, the owner must set clear rules and guidelines for operations that they will then pass on to the new manager. Not only is a rulebook necessary for franchising businesses, but well-defined strategies for sales and marketing are also very helpful in bringing in business to the new location.

Having a training program for new hires is a must, as it will allow the new franchisee to have employees that are qualified to do the job. Having prices that are set across all franchisees is also a necessary detail as it will make sure that no one franchise has a competitive edge over the others and therefore draws away business (even from the original location). While expanding a small business, its owners should protect their brand and their product as much as possible by defining what the franchisees can and cannot do, and making them pass every new idea by the owner before executing it.

  1. Make sure that all legal affairs are taken care of

As is always the case when conducting business, almost nothing is as important as utilizing professional legal resources to ensure that nothing goes overlooked as business becomes a franchise. Hiring lawyers, especially franchising specialist lawyers, is a smart move for business owners who are not entirely familiar with the processes involved in expanding a company.

Additionally, a business that is becoming a franchise should sign a Franchise Disclosure Document. Along with this FDD, a business hoping to expand should write a franchise agreement that all franchisees must sign which protects the intellectual property of the original owner.

Finally, the owner should look into which states and cities are the best for their particular business and for franchises in general – some states are most costly and tedious to build franchises in than others. Because of all of the intricacies involved in franchising, also hiring a franchise consultant is not a bad idea as it will streamline and simplify the process.

  1. Define the big picture aspects of your company

Good franchises will not only share the same brand name, but also the same operating principles that extend beyond the necessary operating manual. Guidelines will make sure that the owner maintains control of the business, but will also maximize profits by ensuring that the franchisees work in the same fashion as the original business. Some of the things that must be considered by owners who want to turn a business into a chain are: how much of the profit will return to the overall owner; territory and location structure of franchise; will each franchisee own one or multiple units.

Once all of these things have been carefully considered and resolved, an owner can go forward in expanding a small business.

  1. Be selective about who you sell a franchise to

Because the people who operate the franchise are, in essence, representing both the owner and the business as a whole, it is important that they are not only good business people but also not taking actions that give the franchised business a bad reputation. Selling franchises to the correct people is one of the most important aspects of expanding a business – it can make or break not only the additional parts of the company but even the original unit as well.

Along with ensuring that the correct people are involved in the process of turning a business into a chain, finding the correct venues at which to attempt sales is vital to the success of the franchising process. Business owners looking to franchise should utilize personal contacts in attempting to close sales, but can also go to networking events and seminars in order to maximize their scope.

While successfully selling a franchise is a huge accomplishment, the franchise owner’s work is not done once they have sold a part of their franchise to a new manager. They must continue marketing efforts for the entire company and most likely expand them as the business is now significantly larger. They must also ensure that the franchisees are benefiting from being a part of their company in more than just monetary ways, and that they are supporting and advising their franchisees so that being a part of the company is a huge positive. Ensuring that franchisees are satisfied with how things are going is of the utmost importance to owners, as if the franchises function well, everyone will experience a greater profit.



Becoming a National Company

Although franchising can be a long, complicated, and difficult process, it can be well worthwhile for business owners looking to expand their profit significantly and establish more of a large-scale presence. Knowing what to do, when to do it, and whom to hire are some of the key aspects of franchising to keep in mind when getting ready to make this large step.

Franchising can require a significant amount of money, even for a business that is doing quite well. Fortunately, using a factoring company to factor accounts receivable can give businesses cash months before they would otherwise be able to get it. Call Factor Finders today to begin learning about how your business can get the money it needs to become a franchise.

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