How Do I Start a Franchise?


When it comes to expanding your business and building a nationally-recognized brand, there aren’t many better options than starting a franchise. As the owner of a franchise, you get branches in various cities without expending too much capital; rather, franchisees pay you to use your brand name and replicate your business system. Also, the time and effort required to develop the branches and make them profitable do not fall primarily on you.

If you are thinking of starting a franchise, Glenn Sandler, CPA, the Founder of G.I. Tax Service has some tips to help you along:

  1. Understand the process ahead

Before starting a franchise, it is important to understand how long and arduous the process may be. The cost of setting up a franchise company is often steep and once launched, it may take over 3 years before your franchise operations start to return profits.

Also, while you won’t be involved in the day-to-day running of your franchises, you will still need to help the franchisees get the business up and running. Talk to other franchise owners and learn more about the work ahead; be sure you are ready before getting started.

2.Get professional representation

You need an experienced franchise attorney to help you through the many legal hoops you are sure to encounter. For one, the Federal Trade Commission requires all franchise owners in the United States to prepare a Uniform Franchise Offering Circular (UFOC); this is the standard disclosure document for franchise operations. Additionally, different states have different legal requirements that need to be fulfilled before a franchise can be opened there.

Also, part of the disclosure process above requires submitting financial reports of the franchise company. You need a professional accountant with experience working with franchises to audit your accounts and prepare the reports.

3.Develop and outline your business system

“The main reason people are paying for your franchise instead of starting a new business is that they want to leverage your brand and business system,” Glenn Sandler opined, “you need to make it easy for them to do so.” You do this by providing franchisees with a clear outline of your business system and how they can apply it to their branches. You also need to help them with marketing and getting their first few customers. Some franchisors organize a short training program for their franchisees; you may consider doing the same.

4.Choose franchisees carefully

As a franchise owner, be careful about who you give a franchise to. Yes, they have the capital, but are your interests aligned? Do they have the background needed to run the business? How well do they work in partnerships? These are the questions you need to ask during the meetings that lead up to signing the agreement.

5.Always protect your brand

The most valuable asset to franchisors is their brand’s reputation. As far as customers are concerned, a franchise is one company. The inadequacies of one branch reflect poorly on all the other branches, even if they are under different management.

Ensure that all your franchises reflect your attitude as an organization and remain cultured always. In addition to getting you more customers, this will also ensure that your company remains an attractive destination for prospective franchisees.

Managing a company and running a franchise are 2 different things. Rather than employees, you have partners, and you have to treat them accordingly. Also, do not start a franchise if you don’t have a business system that can be easily replicated. If you do and you follow the steps above, then you are already on the right track.