(A cynical view of becoming a franchisor)
It may surprise you to learn there are only a few legal requirements to franchise your business. All you need is a federally required disclosure document. You don’t need a lawyer to complete it – and you can even find sample disclosure documents online for free. You can be up and running and legally offering your franchise in the United States in about two hours!
Now, there are a handful of states that require you to either register or file your franchise offering before you offer franchises. But don’t be concerned – just avoid those states.
Don’t worry about the Federal Trade Commission either. You don’t have to send them anything or even notify them that you’re offering your franchise in the U.S. They don’t have anyone on staff who will review your franchise disclosures, and you don’t even need their approval before you go to market.
Now I assume you might think you need a profitable business before you become a franchisor. Au contraire! Not only isn’t there a legal requirement that your business be profitable, but there is also no legal requirement that you have any operating business or business experience before you offer your idea as a franchise. You don’t even need a federally registered trademark.
Don’t take the above as any indication we are advocating for additional regulation. We are not. While the form of franchise disclosure needs to be modernized, disclosure and market forces typically prove to be the most effective methods to protect franchisors and prospective franchisees.
How to Franchise Your Business… Successfully
As discussed above, Anything can be franchised. The first question to ask yourself, if you want to be a Successful franchisor, is not Can I franchise my business – but – Should I franchise my business?
The regulatory scheme that governs franchising presents few substantive legal hurdles to become a franchisor and we frequently see emerging franchise systems that are designed to sell franchises but are not designed to be long term successful. Taking the quick and easy route not only puts the emerging franchisor at high risk of franchise system failure but also the franchisees who have trusted them by investing in the system.
Becoming a successful franchisor with a marketable franchise offering requires a deliberate and supported process that not only evaluates whether or not you should franchise your business, but allows for a system that enables the sustainable growth and replication of your business at the retail level. Successful franchise systems are much more than merely a way to offer your products and services. It is essential that each of your franchised locations conveys the culture of your company to customers.
So much information online today focuses only on franchise sales and franchise system growth. To be honest, selling someone on the chance to invest in your franchise offering is fairly easy. Great franchise sales talent (and there are many great franchise recruiters) can market even the riskiest of opportunities. Franchise insiders talk all the time about systems that grew quickly, became popular – and vanished.
Is your franchise offering consistent, sustainable, and replicable?
Whether your franchise system is built to be Consistent, Sustainable, and Replicable is much more important than franchise sales and system growth. Putting in the hard work up-front to design and develop your franchise offering gives your investors, and your franchisees, the best opportunity for success. Sustainability is the keystone to franchise system success.
The International Franchise Association recently began a major push to emphasize and support the idea of “Responsible Franchising”. This is an effort that MSA Worldwide has been a key supporter of, as I am a member of both the IFA Board of Directors and the Article Eleven Task Force that developed that initiative.
This Article Series Will Explain How to Franchise Successfully
MSA is acknowledged as one of the leading advisory firm in franchising with decades of experience. The next article in this series will focus on the basic considerations and subsequent articles will explore how to evaluate whether or not to franchise your business, how to develop, grow, manage, support your franchise system, and the necessity of communication so that your efforts will result in a sustainable franchise offering and franchise system.
Along the way, we will answer your questions and deal with subjects and issues you might advance. Just send them to our contact form. Looking forward to a great discussion of how we can all continue to franchise both responsibly and effectively.
– Michael Seid, Managing Director, MSA Worldwide
MSA Worldwide’s franchise consultants are the leading tactical advisory group in franchising. Learn more here.