As you set out to answer the question “Can I franchise my business?” you should note that not all business people who try to franchise their businesses succeed at it. This happens for various reasons especially not using a good franchise agreement. To avoid ending up in a similar situation, you should do all your franchising “homework” ahead of time.

Can I Franchise My Business AND Do So Successfully?

The first thing you need to do is to look at the state of your business. Is it a successful business? Has it been performing well consistently? Your answer should be positive. In addition, you should already have units of the same business operating in a few different locations.

In order to succeed as a regional or national franchise, it is also ideal for the goods or services being sold to have something distinct about them that can be reproduced nationwide by people other than the franchisor. At the same time, there should be a demonstrated demand for them. There is no point in franchising a business that provides services or goods that are not sought after. Once the initial buzz surrounding the franchising dies down, there is no guarantee that the latter type of business will attract the attention of potential franchisees and customers. Undertaking market research is one of the ways to get around making this kind of mistake.

An important part of answering the question “Can I franchise my business?” involves seriously thinking about the changes that franchising will bring to the business and to your role in it. If you have very rigid ideas about the shape of the business, you may have to let go of some of them. Making the business more amenable to franchising might necessitate modifying part of your operation. It will certainly necessitate your adoption of a new role that entails marketing your ideas to others and teaching them.

If, after carefully considering all these steps, you are still interested in franchising, it is time to look into the legal requirements, financial arrangements and operational details that come with franchising. Your answer to the question, “Can I franchise my business?” will ultimately depend on your willingness to tackle these steps.

Read more on: http://www.franzoom.com/franchise-articles/knowing-which-franchise-regulations-affect-your-business-is-key-to-successful-franchising/

Franchise companies, otherwise known as franchisors, typically sell their franchises in 2 ways. They either sell the franchises themselves which has its own set of challenges and obstacles or they can hire a brokerage firm to sell the franchises for them and pay a commission fee to the franchise broker. This model has worked great for many years but it’s limited in its structure.

You see, franchising consulting works pretty well on a very basic level. You find prospective franchise owners, you sell to them and you get paid when they buy a franchise. It’s a one-time deal that has zero leverage and no real scalability especially if you are the type of entrepreneur that thinks big.

Fast forward to today and there’s been a huge revelation in this industry. The new model in the franchising consulting world is based on the insurance industry, which is an “agency” model. This means that consultants get “rewarded” for being an entrepreneur by being a leader and developing and managing a sales team.

As a reward for being a leader, the franchise consultant will get “overrides” or bonuses depending on their level of leadership or what branch or division they oversee.

What’s the overall effect? Leverage. There is a huge component of leverage that now takes place and truly rewards the franchise consultants who can rise to the top. This type of business model is definitely attracting top entrepreneurs who understand business and understand the power of true leverage. If you look at the rich, they have their money work for them (leverage) instead of them working for their money.

In the franchising consulting world, this type of model has NEVER been done before. It has literally revolutionized the way franchises will be sold forever. Any smart business owner knows that having leverage in your business is an absolute must. What I predict will happen is franchisors will see the power of this model and see the benefits of having XFM reps market their franchises.

The first thing you’d like to avoid is to be swayed by an offer for you buy a business that you’re not even genuinely interested in. For example, an automobile dealer may convince you that his business is doing great and that you can make an even better job running it yourself. But do you even like cars? You do ride cars and you need them, but do you have the slightest about what lies underneath a hood that makes your own car run? You don’t have to be a master mechanic to buy an automobile dealership but at least, you have to be interested in what you’re selling because that’s what’s going to make your business interesting to you. And when it’s interesting to you, running it will be the easiest job in the world. Still, you can’t be inflexible. Yes, you need to be interested in the nature of the franchise you’re planning to buy but your interests don’t always have to be the ones you’ve known a long time. You can always explore within you and explore different franchises that may just work for you.

The second pitfall you’d like to stay away from is not conducting a background check on whatever franchise you’re looking to buy. Of course, this is important because you can’t just trust anybody’s word without ascertaining what level of credibility they have in the business community. You should research on this company’s history, the people who have been in and out of it, their other business activities and the like. Most importantly, you need to know just where the business stands, financially speaking. You can’t expect a current owner to show you everything, though. He may show you his books but remember that these will be income tax returns and other documents which were probably intended to minimize taxes. That means you can’t really expect to see how much profit this business is making just by looking at its financial records. For this, you can only rely on practical information such as popularity and, of course, how the business fares in relation to other businesses within its league.

The third mistake you can make is not establishing rapport with the current owner. This may sound odd but getting friendly with the owner has its benefits. It makes transactions easy to deal with and faster to complete. Getting comfortable around the owner also allows you to ask all the questions you want to ask such as what they think of their profits or how they think their business will perform in the near future given current market trends. Building rapport with the owner is something you don’t want to skip because this will give you the power to probe into the real financial standing of the business in the most natural way – a very good strategy to getting the most natural and honest questions, too.

Fourth, don’t buy a franchise without seeking professional advice. You may be the best person to buy the next Wendy’s franchise, but if you’re not in the business of franchise-selling, you’re always better off finding someone who is. You need to have someone who has the right machinery to find the right business owners you can buy a franchise from. Besides, these professionals do it all in a day’s work. In short, they’re indispensable.

The process is unique in that you are working diligently to sell a business model and idea to someone who might be considering starting their own business, but at the same time you are looking for talent and the right characters to join you as a partner in business. If you oversell – you are destined to attract the wrong candidates, if you don’t sell enough, no one will be knocking on your door. It is a fine line between being aggressive and consistent with your pushing on new franchise sales while also being reserved enough to look at each candidate from a logical perspective and analyze whether it is someone you would truly enjoy doing business with.

Maybe you have heard the term “takeaway sale”? This is a term that describes a sales process that is counter intuitive to most sales processes in that you are not pushing the prospect to buy your service or good, you are almost telling them that they cannot have it. I have found that by employing this sales tactic in franchise sales, it accomplishes two things. One, that the franchise organization selling the franchise will become less pushing on “Selling Franchises” and avoid situations where a franchise was sold to the wrong candidate. Two, that the franchise buyer tends to want what you wont give to them when you are not pushing the sale on them. It’s funny, people want what they can’t have….franchises included.

The ultimate key to franchising successfully is to create an image of success, business structure and continuity throughout your business model. The franchisee should feel that you have everything “figured out” in how you operate so that they won’t have to.

In an operations manual, everything about your business is standardized and documented. It becomes a toolkit for replicating what you do. It can become your training textbook, saving you countless hours and helping people with different strengths and skill levels to perform tasks in the same way. Clients can also be assured of a consistent experience.

If you intend to franchise, documenting everything in an operations manual is essential. Mike Cotsworth of Car Connections Ltd. is planning to franchise his business soon. “Having a formalized system for franchisees to follow will prevent them from taking short cuts or dreaming up their own ways of doing things — which may dilute or derail a proven way of doing something,” he explains. “This has forced me to examine and define what the best steps are and write them down. Before doing this, I had it all in my head, so I worked by habit and experience. Now it’s being formalized into specific steps that someone else can follow.”

If your business is currently just you, clearly documented procedures are valuable. Carol Johnson, The BookStormer, helps authors bring their book ideas to fruition. “I documented each process in my work,” she told us. “I did this for anyone else I might train in the future, but having this process in place also lets me fine-tune it as I go. I can easily use it to meet each author’s specific needs. The biggest challenge for me was just sitting down and doing it.”

Write Your Manual

“When writing, you must think of your audience and set the tone accordingly,” Craig Dietz of Special Ops, LLC, advises. “Don’t use legalese, make it readable and use practical, easy-to-understand language. Know your topics and the people you’re writing to.”

Step One: Know Where You’re Going

Consider where you ultimately want to take the business, and keep this in mind as you write.

Step Two: Get Organized

Create an organization chart for your company. Draw boxes for each major area of responsibility. This offers a visual overview of the business that is easy to see at a glance.

Step Three: Start Writing

Set up a file on your computer or use a three-ring binder or notebook for your first draft. Assign a different section for each aspect of the business, then:

o Outline each section

o Develop a job description for the person responsible

o List all necessary tasks

o Write down exactly what is involved for each task

o Spell out step-by-step instructions and a sequence to follow for each task

Use pictures, diagrams or charts to illustrate or clarify your points.

As you write, think about all the things that could possibly go wrong, list these and build in action steps to correct them.

Step Four: Get Feedback

Ask several others with similar experience and backgrounds to those of your reader to look over the document and give you feedback. Find out if there were steps you missed, details you forgot to mention, or words and concepts they didn’t easily understand.

Step Five: Polish It

Write your second draft. If the manual is for others to use, consider hiring a professional editor.

Step Six: Schedule Regular Reviews

Set times, perhaps once a year, to regularly review and update your manual. If you have added new products, services or markets, or made any changes in the way you do things, this information should be included.

Don’t wait until the business is mature to write your manual. Begin now. If you can’t devote a large block of time, allocate several hours each week to the project. If you’re consistent, you will soon have it completed and be ready to grow a healthy, profitable business. You will also be able to enjoy a vacation, knowing that those left in charge are able to do a first-rate job of running the business while you’re gone.

Franchising refers to the right that a company gives to a selected set of enterprises to sell its products and services at various locations and outlets, within and outside the state and country. This method has picked up momentum in all sectors especially the retail stores and branded fast food companies. It is amazing that without their actual existence, they make their presence felt in the franchisees’ market.

There are many advantages to adopting this method. When you as a franchisor opt to franchise your business the first and foremost relaxing element is that you do not need to make any investment. This would be taken care of by the franchisee, who has to have a huge amount as initial investment. Secondly, local franchisors would help in expanding the market fast as would be thorough with the local market trend, the customers, their attitudes and the market capturing formula. No doubt the franchisor’s products and services are being expanded and sold at different places. But the real bonanza is that, over and above this sale profit, the franchisor gets handsome money as upfront fee when a franchisee is given the rights of franchise. The other double bonanza is that the franchisee also has to pay a royalty fee annually, till the period he enjoys the franchise benefits and acts as a franchisee.

But franchising isn’t that easy too. Many doubts and questions may arise regarding this. You need to make lot of assessments, calculations, study market trends of different places and choose the locations for opting for franchisors and then go for advertising. Once this is out, there will be numerous applications and once again you need to boggle your mind, whom to select, what to select, what criteria to be kept etc. How to plan it out? What should be the Franchisee fee? How to select a suitable Franchisor? What documents are required and how it is to be prepared and set? What would the agreement be like and how to prepare it? What system of operation is to be followed? What would be and should be the terms and conditions? You can get a detailed and complete guide on all these matters from franchisee manual which can be obtained from some reputed websites.

Before you sign the franchise agreement you need to be comfortable with all of its provisions. In order to achieve this comfort level you and your franchise attorney may feel it necessary for the franchisor to make changes to the agreement. Some franchisors will negotiate terms of their franchise agreement while others will not. Quite often, the decision to negotiate is based upon the size and maturity of the franchisor. The larger franchisors find it much easier to say “no”. Although franchisors are guided by franchise regulations, state statutes and sound business practice, certain provisions can be negotiated and changed.

Before you arrive at the point of negotiating your franchise agreement there is a process you’ll need to follow.

· Engage An Experienced Franchise Attorney To Review The Agreement

· Confirm That The Franchisor Will Negotiate Terms Of The Agreement. Some franchisors will not make any changes to their agreement. On the other hand some franchisors may have unreasonable or onerous terms in their franchise agreement. In order to protect yourself make sure your attorney reviews the agreement to identify any possible issues even though you can’t negotiate the agreement.

· Recognize That Certain Terms Are Non-Negotiable

Royalty fees, territory size, termination provisions, length of the agreement, non-competes and legal venue are examples of what are considered the “untouchable” provisions. Few if any franchisors will negotiate or change these provisions.

· Focus On The Important Points In The Agreement.Restrictions on products and services that you wish to sell

· Indemnification Provisions. Be careful that you’re not held liable for loses or damages that are not caused directly by the acts of you or your employees. You may request language, which does not require you to indemnify the franchisor if you follow the procedures and policies of the franchisor.

· Advertising. Provisions that require you to spend a set dollar amount or per-cent of sales on advertising may be lowered during your first few years of operation.

· The Transfer and Assignment Section. Be sure your attorney carefully reviews this section and that you understand your responsibilities and rights.

These represent some of the more noteworthy examples of sections in a franchise agreement, which you and your attorney may wish to negotiate. A franchise agreement is a complicated document and by design is favors the franchisor.

Make sure that before you sign on the “dotted line” you fully understand your obligations and are comfortable with the final agreement.

Before you sign the franchise agreement you need to be comfortable with all of its provisions. In order to achieve this comfort level you and your franchise attorney may feel it necessary for the franchisor to make changes to the agreement. Some franchisors will negotiate terms of their franchise agreement while others will not. Quite often, the decision to negotiate is based upon the size and maturity of the franchisor. The larger franchisors find it much easier to say “no”. Although franchisors are guided by franchise regulations, state statutes and sound business practice, certain provisions can be negotiated and changed.

Before you arrive at the point of negotiating your franchise agreement there is a process you’ll need to follow.

· Engage An Experienced Franchise Attorney To Review The Agreement

· Confirm That The Franchisor Will Negotiate Terms Of The Agreement. Some franchisors will not make any changes to their agreement. On the other hand some franchisors may have unreasonable or onerous terms in their franchise agreement. In order to protect yourself make sure your attorney reviews the agreement to identify any possible issues even though you can’t negotiate the agreement.

· Recognize That Certain Terms Are Non-Negotiable

Royalty fees, territory size, termination provisions, length of the agreement, non-competes and legal venue are examples of what are considered the “untouchable” provisions. Few if any franchisors will negotiate or change these provisions.

· Focus On The Important Points In The Agreement. Restrictions on products and services that you wish to sell

· Indemnification Provisions. Be careful that you’re not held liable for loses or damages that are not caused directly by the acts of you or your employees. You may request language, which does not require you to indemnify the franchisor if you follow the procedures and policies of the franchisor.

· Advertising. Provisions that require you to spend a set dollar amount or per-cent of sales on advertising may be lowered during your first few years of operation.

· The Transfer and Assignment Section. Be sure your attorney carefully reviews this section and that you understand your responsibilities and rights.

These represent some of the more noteworthy examples of sections in a franchise agreement, which you and your attorney may wish to negotiate. A franchise agreement is a complicated document and by design is favors the franchisor.

Make sure that before you sign on the “dotted line” you fully understand your obligations and are comfortable with the final agreement.

But for this you need to know many things and be aware of the formalities that need to be followed. When you go for selecting a franchisor you have to know many details about the franchisor, his location, the market, its trend, how your company’s reputation would be etc. While going for franchising, there are many agreements and other documents that need to be prepared. The terms and conditions are to be laid down clearly. There needs to be some declarations that have to be made which would include details like the number of years in business, the details of existing franchisees, what is your proposed plan for expansion and diversification, and also certain financial information of the franchisor too. So prudence need to be adapted while making the declaration papers. Code of Conducts is to be laid down. The site of operation, the demographical limit etc need to be finalized. Detailed awareness of the company’s products, its specifications, its advantages etc. need to be well put in to the franchisor and proper training for operational personnel needs to be given by the franchisor. The franchisee has to give a fixed amount as fee to the franchisor and also pay royalty for using the franchisor company’s brand name, goodwill, etc. for his own profits. This amount needs to be determined. So also the commissions, marketing and advertisement fees and other such fees need to be decided.

Above all, there needs to be a clause on litigations, if any, that may arise. In case of termination of franchisee, what would be the mode of coming to terms? There also occurs many governmental interference and requires departmental clearance. Sometimes, you may seek for a consulting firm to take up the entire responsibility. In that case, searching a suitable firm is yet another tight rope walk.