THINGS TO CONSIDER BEFORE FRANCHISING YOUR BUSINESS
Feb. 7, 2022
When we hear the word “franchise,” most likely the image of the Golden Arches and McDonald’s comes to mind. McDonald’s truly is one of the most successful franchises, with its presence now spanning the globe and generating billions in sales.
According to Entrepreneur magazine’s annual “Franchise 500” ranking, McDonald’s ranks only number 11 on the list; however, the number one franchise is a fast-food franchise with its roots in San Bernardino, California – Taco Bell.
The magazine’s rankings, of course, aren’t just based on sales but categories such as cost and fees, growth opportunity, support, brand strength, and financial stability.
In all, roughly 750,000 franchises are operating in the U.S., employing some 8 million people; moreover, fast-food franchises make up half of the operations, and McDonald’s has the most.
You may be operating a business right now that you would like to franchise, but there are specific questions you have to ask yourself before testing the franchisor's waters.
If you want to explore your opportunity as a franchisor, contact the Bundy Law Firm PLLC. We have spent four decades advising and guiding franchisors and franchisees, and we know the business like no other attorneys in the U.S. From our office in Seattle, Washington, we serve clients all around the country, including Oregon, Texas, and Florida.
Franchising Basics: The Franchise Disclosure Document
In the 1850's Isaac Singer became the first franchisor in America. He wanted to sell his sewing machine nationwide but knew he could not do it himself, so he sold licenses to others throughout the country. This became the model for franchising, which has evolved now to the point that franchising is regulated by the Federal Trade Commission (FTC).
In fact, before venturing into the franchising marketplace to replicate your business model, you should consider FTC’s requirements. The commission requires that you complete a Franchise Disclosure Document (FDD). The FDD template has 23 sections that you must fill out, covering everything from fees to franchisee obligations to franchisee restrictions to dispute settlement – and much more.
The Franchise Disclosure Document (FDD) is an essential document for getting started in the franchising business, and working with experienced franchise attorneys to get the document right can protect you going forward. The last thing you want to do is start franchising your business only to have endless franchisee disputes.
Other Questions to Ask Yourself
In addition to studying the requirements of the FTC before launching your franchise operation, there are several other questions you need to ask yourself, including:
Is My Business Ready to be Franchised?
You may want to try opening additional sites for the business you wish to franchise to see if the concept works elsewhere. After all, a franchise must have mass appeal, and your business model should set itself apart from others in the same field.
Do I Have Policies and Procedures in Place?
This question will be at least partially answered when studying or completing the FDD, but to franchise your business, the franchisees must learn and master how the business model is operated. They must be able to recreate the uniqueness and the appeal of the original.
Am I Ready to Support the Franchisees?
McDonald’s operates to train its franchisees on how to successfully replicate the business model. Though it is doubtful someone just starting in the franchise industry can operate such a centralized training operation, your franchisees need your support. They may end up calling you regularly with questions if you do not provide a full blueprint for their operations.
Do I Have an Advertising and Marketing Plan?
Your franchisees expect you to put them on the map, to use a popular saying. In other words, you will need an advertising and marketing plan to introduce your product or service to the public, so when a franchisee opens their business, the public is aware of what you offer.
Do I Have the Time to Handle Everything?
If the business you hope to franchise is already taking all of your time, franchising is probably not an option. You will have to turn over your business to others to run for you. Being a franchisor requires a lot of time and energy to attend meetings with potential franchisees, visit sites wherever they are located, and ensure quality control at all locations.
Am I Legally Ready to Begin Franchising?
Like McDonald’s, you need to have legally protected trademarks – logos and slogans – that you can share with your franchisees to announce their presence in their new markets. If you have trade secrets – a recipe or process that is unique to your business – you will need to set policies and safeguards in place to protect them. The attorneys at Bundy Law Firm PLLC not only can help you answer and complete this question but all of the other ones as well.
How Skilled Counsel Can Help
All of these questions are best addressed with experienced franchise attorneys, who can guide you through the process of starting a franchise operation. You may indeed have a business ready to be franchised, but going it alone is not an option. There are practical steps and legal requirements that only attorneys with knowledge and experience in the industry can guide you through.
If you are serious about franchising your business, contact us immediately at the Bundy Law Firm PLLC. We have been helping franchisors for 40 years and can stand ready to help you. The Bundy Law Firm PLLC office is located in Seattle, Washington, but our firm serves clients all around the country, including Oregon, Texas, and Florida.