Franchising Your Business? Consider This Legal Perspective First

Once you start franchising your business, a few changes take place. You are not only running your business, but also helping franchisees launch their businesses.


Photo: Robert J. Steinberger, Founding Partner of the Law Offices of Soden & Steinberger, LLP; Source: Courtesy Photo
Photo: Robert J. Steinberger, Founding Partner of the Law Offices of Soden & Steinberger, LLP; Source: Courtesy Photo

Once you start franchising your business, a few changes take place. You are not only running your business, but also helping franchisees launch their businesses. At first it can be a little challenging. The key is to take the changes in steps, remembering that many of the new additions to your plate aren’t really new, they are what you were already doing, just on a bigger scale.

Here’s a look at five things you will definitely need to keep in mind as you grow your franchise:

 

  • Internal Support

    As your role starts to change, going from running the day-to-day operations of your business to expanding your empire, consider transitioning to becoming more of an absentee owner.

    To prepare, bring key staff members up to a more prominent role in management. While completely becoming an absentee owner might not be your dream, the extra support of capable management will help ease you through the process of providing support to the first franchisees. You will be incredibly busy helping them, as well as learning the franchising process for yourself. Once you determine what managing and providing support to franchisees looks like, you can adjust, shuffle responsibilities around or develop a new position. All of that can be flushed out after you get the first few franchises off the ground.

  • Attracting New Franchisees

    The most time efficient model to grow your franchise would be to employ a business broker. While they charge a commission, it is a wise investment if nothing else for the time they can save you. That coupled with the high caliber franchisee candidates they provide makes it an easy decision. Brokers are great, but always stay on the lookout for potential franchisees through personal networks. Many franchisees actually come from within your own organization. Making it known that former employees went on to later own their own franchise might motivate current employees, spurring a passion to learn and deliver within your business.

    There are many online sites that curate and list franchise opportunities for potential business owners. Make sure that your franchise is listed in as many of these as possible. This way franchise searchers can be introduced to your franchise early on. As the success and awareness of your franchise grows, you will have candidates seeking you out.

    It will also be important to have resources on your company website that discuss the benefits and requirements for opening one of your franchises. This way those that like your business model and want to do the same can easily find the resource to open a franchise. When reviewing franchisees, it is important to remember to make sure you do your homework ensuring they are a fit for your franchise. Not only will they be representing your business, you will also have to work with them as they get the business off the ground, as well as support thereafter.

  • Supporting Franchisees

    Franchises are businesses on training wheels, with you as the parent business. This is fitting, as franchisees will need support and direction, not unlike children. Remember, many franchisees will be new business owners, or have unsuccessfully started a business in the past. That is why they bought into your franchise.

    As the parent business, one of your greatest responsibilities will be to help them through the process of opening and running a business. Initially franchisees will need extensive support, ranging anywhere from property and location selection to learning your systems and hiring great team members. As they get settled into the business, their support demands will wane. But just like grown children, they will need some guidance throughout the life of the franchise, weathering the bumps and bruises that any business faces.

  • Know the Trends

    You have a small empire to manage. Just like with your original business, you need to know what is happening in the market. With stakes a little higher, as you are looking out for all of your franchisees in their various markets, being informed becomes more important than ever.

    Feel overwhelmed? Don’t worry, you aren’t alone in this endeavor. With committed, invested owners running your franchises, the franchisees will also be monitoring trends. With skin in the game, franchisees develop ideas and promotions to give themselves an edge in their own markets. Find that hard to believe? Perhaps you have heard of Subway’s $5 Footlong promotion. Guess where that originated? A franchisee by the name of Stuart Frankel who owned two Subway franchises started the $5 Footlong craze almost 10 years ago.

    While on the lookout for a new promotion to compete with the dollar menus at other chains, Subway adopted the promotion, which was a nationwide success. While you are on your endeavor to chart trends and explore other markets, take strength knowing that your franchisees will be doing the same. Don’t forget to check and see what is working, or not working, at each of their storefronts.

  • Pursue Opportunities

    Hopefully you’ve carved out placeholders to introduce proprietary products into your franchise, because now you have the opportunity to circle back and work on strengthening your revenue streams. That pizza sauce on the verge of being perfected, or that shampoo that just needed a few more tweaks can now be completed, produced and integrated into your company.

    Even if you didn’t build in proprietary products into your franchise, you can still work on opportunities for growth for your business. If you develop a new product or service, such as dog treats, new clothing line or resume template, what better way to test it out in the market than through all of your franchises? And if your franchises can make a profit on it as well, there is little reason they wouldn’t want to add it to their shelves.

While the changes from running your business to running a franchise can be overwhelming, remember the new role represents so much of what you loved about opening your business in the first place, fueling that entrepreneurial drive.

 

This article has been edited and condensed.

Robert J. Steinberger is a founding partner of the Law Offices of Soden & Steinberger, LLP, a San Diego based practice that focuses on focuses on both businesses entity formation and also in civil and business litigation. He specializes in helping franchisors build their business, as well as he is a franchisor himself. He is adept at both creating the best legal structure for your enterprise as well as setting the foundations for franchise owners and buyers. Connect with @LegalMattersLLP on Twitter.

 

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