How to Franchise a Business

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When you franchise a business, you set yourself up to sell two separate but related products: the items you offer to customers and the business itself, which you will sell to franchisees. To offer something of value to customers, you should offer a quality product for a fair price. To offer something of value to franchisees, you should develop systems that allow a business owner to earn a profit and take ownership of a business that will run smoothly without ongoing, unanticipated problems.

How to Franchise a Business

To franchise a business, first develop a profitable business model. Choose products and services that can be made from readily available materials and skills. Build a brand by defining the intangibles you will provide for your customers, such as health or convenience, and then infuse this message into your offerings, the design of your physical location and your marketing materials.

Develop systems that can be easily replicated in different places with different personnel, so franchisees are well positioned to learn and then begin operating. Create written materials that communicate your franchise's message and its systems. Chart a fee structure that lays out how much franchisees will pay you, both as an initial investment and as royalty payments over time. Make sure your business model allows for sufficient profit for franchisees to cover these payments. Work with a lawyer to set up a franchise agreement that you can present to potential franchisees.

The Top Businesses to Franchise

Out of Entrepreneur magazine's 2018 Franchise 500's top 10 rankings, six were food service businesses, including McDonald's, 7-Eleven, Dunkin Donuts and Hardee's. The top 10 also include two hairstyling franchises: Great Clips and Sport Clips. The UPS Store also made the top 10, as did RE/MAX LLC realty company.

Business Franchise Examples

McDonald's is the most obvious example of a successful business franchise, with more than 35,000 stores in over 119 countries. It still tops Entrepreneur magazine's Franchise 500 list. In 1955, the founder, Ray Kroc, was working as a milkshake salesman when he visited a Southern California business using systems he believed he could replicate and market far and wide. In 1961, he launched Hamburger University, an institution that educates franchisees about systems and standards. McDonald's golden arches signify a brand presence that is visible from a distance and known all over the world.

In contrast, Great Harvest Bread offers a franchise model that gives franchisees considerable leeway with store layout and even recipes. The Great Harvest franchise model is geared towards creating a healthy work-life balance for franchisees and helping them connect with a community of other entrepreneurs owning Great Harvest locations. Like McDonald's, Great Harvest requires franchisees to travel to a central location to train and learn about how to operate successfully and in ways that are consistent with the company's vision.

References

About the Author

Devra Gartenstein founded her first food business in 1987. In 2013 she transformed her most recent venture, a farmers market concession and catering company, into a worker-owned cooperative. She does one-on-one mentoring and consulting focused on entrepreneurship and practical business skills.