At Diffactory, we specialize in helping entrepreneurs grow their businesses. One of our specialties is assisting companies that are considering expansion by franchising or licensing all or part of their business. In this two-part series, we will explain the differences between licensing and franchising, and how each can be used to effectively grow your business beyond your current capabilities.
What is “franchising?”
Franchising allows entrepreneurs who buy into your business the ability to sell the product or service your company offers and to use your operating system. The entrepreneur typically pays a lump sum to gain access to your business, and then pays an ongoing monthly or annual fee in return for ongoing training, branding, and marketing support. The Federal Trade Commission is also responsible for monitoring franchises, giving an extra layer of security and support for franchisers and franchisees alike. Franchises are on the rise, here’s a look at growth rates in various lines of business:
Why should I consider franchising?
For many businesses, franchising can conquer three common major roadblocks to growth: lack of money, manpower, and time. Since people buying into the franchise provide an initial investment when they are accepted into the business, franchising allows for minimal investment on the part of the franchisor. Franchising tackles the issue of finding adequate managers by filling those positions with motivated entrepreneurs who have invested in the business and have a stake in the profits. And while opening another location or branch of a business takes an extensive amount of time—finding a site, designing a space, training staff, purchasing equipment—this time is greatly reduced for the franchisor because while they are providing guidance, the franchisee is doing the legwork.
For companies with too little time (or too little staff), franchising is often the fastest way to grow. That’s because it’s the franchisee who performs most of these growth tasks. The franchisor provides the guidance, of course, but the franchisee does the legwork. Thus franchising not only allows the franchisor financial leverage, but it allows for the leverage of resources as well.
What steps do I take to create a franchise?
After you’ve researched the options and decided to move ahead with franchising your business, what happens next? Once your growth plan is in place, you’ll need the proper legal documentation. Since franchises are regulated by the FTC, you will want to find someone with experience in creating a franchise to guide you through this process. There are literally hundreds of different business issues that must be addressed in a good franchise agreement, and the decisions made regarding these issues could greatly affect your success as a franchisor.
Next, you will want to set up a variety of highly developed systems to bring new franchisees on board and guide them as they grow. The better your systems, the more successful your franchisees will be and the less time you will have to spend guiding them through the basics. This often includes a company intranet where policies, forms, frequently asked questions and basic on-boarding can be accessed by all franchisees.
The final, and most important, part of franchising your business is your ability to attract interested entrepreneurs and sell franchises. This requires education and training in available sales funnels and channels, including website creation and targeted social media marketing. It also might mean creation of brochures, training webinars, and digital images to use for marketing purposes. Once these potential franchisees are in your pipeline, you need to be able to land the sale. This might require training from leaders experienced in creating franchises to become successful and turning potential candidates into successful franchisees.
With the proper setup, support system and training, franchising can allow small companies to grow and scale quickly. At Diffactory, we have over 9 years of experience helping successful businesses grow into even more successful franchises. Are you ready to learn how franchising could radically change the growth rate of your business? Contact us today by clicking HERE or giving us a call at 816-287-2010.