FAQs About Franchising Your Business
Aug. 31, 2022
You have a thriving business that is running smoothly, and you start thinking your concept could make a good franchise opportunity for others. This would not only expand your brand but also guarantee you a monthly revenue from any franchisees who sign up.
You start moving forward with your plan as a franchisor, but then reality sets in. There are Federal Trade Commission (FTC) and state regulations to meet. There are processes and training resources that need to be put into place. There are costs for setting everything up, and yes, you do need to find franchisees.
Suddenly, your idea looks a bit more challenging than you originally thought. What factors should you consider in setting up your franchise?
A good understanding of the terms and concepts involved is the perfect starting place. Couple that with some practical advice, and you can make your dream come true. You may not end up with 36,000 franchisees like McDonald’s, but you will have built up your own small empire that can hopefully benefit you for the rest of your career.
If you’re looking to franchise your business, rely on franchise attorneys who have been involved with franchisors across the nation in explaining the ins and outs and helping them get their ideas off the ground. Contact the Bundy & Fichter PLLC with all your franchising questions.
The firm is based in Seattle, Washington but proudly serves clients across the nation, including Oregon, Texas and Florida, providing the insight and on-hands experience that few others possess.
Frequently Asked Questions (FAQS)
Through the years of helping franchisors, the attorneys at Bundy & Fichter PLLC have encountered several questions that all franchisors seem to share in common. Here are some of the most frequent, with answers provided:
What are the benefits of franchising my business?
The most obvious answer is, if done successfully, your brand will reach additional areas of the country. This will expand not only the value of your brand, but also open your business up to new revenue streams that you likely would not be able to achieve if you just opened up new locations on your own.
Of course, you must have a brand that will stand out on its own and that will attract customers for your franchisees. And you must also be able to supply your franchisees with the training and other resources needed for their success, including marketing and advertising. If you succeed, you can be in business for a long time with a nice revenue stream.
What are the drawbacks?
In addition to having to train your franchisees and help them get up and running through advertising and promotional efforts, you’re also going to need people on your staff to help you do this. In the beginning, with just one or two franchisees, you may be able to impart your “secret sauce” on your own, but as things grow, you’re going to need to have established procedures and policies in place. You may not end up running Hamburger U like McDonald’s, but your franchisees are going to look to you for guidance and direction.
How do I know if my business is ready to franchise?
It helps if you have more than one location, and you apply the same principles to all of your operations. If everything is running smoothly, and it becomes easier each time you open a new location, you’re probably well on your way. You yourself must first develop operating principles and policies that lead to success before you can ask others to copy what you do.
What are the steps to franchising my business?
As mentioned, the FTC and states generally regulate all franchises. The FTC requires that you develop a 23-point Franchise Disclosure Document (FDD), which you must supply to potential franchisees. It covers the nature of the business, its financial resources, the obligations of franchisor and franchisees, and much more.
This is the first step, and it’s generally not just a downloadable form where you fill in the blanks. You’re going to need the help of a franchise attorney. State laws and regulations also often pertain, so you’ll need an attorney to guide you on that as well. Beyond the FDD, the final step is an actual franchise agreement signed by the franchisor and franchisees, which will also require careful legal review and input.
What is the difference between franchising and licensing?
Franchising is more like operating a clone of the original. As a franchisor, you share your logo, trademarks, trade secrets, and products/services to the franchisee, who then follows your ideas and instructions in establishing the clone.
Licensing, on the other hand, just give a third party the right to use your logo or trademark. For instance, Disney doesn’t manufacture all its toys and consumer products on its own. It provides licenses to other manufacturers to produce these goods.
Do I need an attorney to help with the process?
The answer is definitely “yes.” Even just completing the FDD and jumping through other legal hurdles and regulations is going to require someone familiar with the process. Then, disagreements and disputes with your franchisees may arise from time to time. You need to make sure you have an ironclad franchisee agreement to protect your rights beyond the FDD.
Put Your Business in Good Hands
Franchising is a tremendous opportunity, but you have to make sure you have all processes, policies and legal documents in place. Otherwise, matters can quickly spiral out of control, or maybe not even get off the ground to begin with.
If you’re serious about franchising your brand, contact the skilled attorneys at Bundy & Fichter PLLC immediately. The firm’s team has encyclopedic knowledge of the process, coupled with years of experience in helping budding franchisors across the country.