Starting A Franchise

 

In the first place, if the business which you have founded has even gotten to the point where you’re considering starting a franchise, then congratulations! You’ve made it farther than most. But now you have to consider what the next step will be. To expand your business, you either have to keep opening new locations yourself one at a time, or start a franchise and let other people follow your trail - hopefully to your mutual benefit!

 

Franchising a business basically entails licensing your business name and method of operation out to third-parties who can start their own chain in a remote location under your partial management. The franchisee gets the benefit of founding and operating a business under your business’ name, getting a head-start on being a business owner instead of making a raw run from the ground up. In exchange, they pay you a percentage to reimburse you for the name of your business, your trademarks and brand names…

 

Hey, wait a minute! Those do belong to you, don’t they? That’s the first step in starting a franchise: go through the steps necessary to nail down all of the trademarks, business names, brand names, patents, and logos that are associated with your business. Make sure that they are legally considered to be unarguably yours. If your business involves some kind of patent on a process and you intend to lease out the use of this patented method as part of the franchise, make sure that the patent is filed and is very clear.

 

Next, be prepared for perhaps the most difficult phase: drawing up the franchise plan. Since you will only be offering franchises on your terms and require them to follow your rules, you will have to draw up documentation of what those rules are exactly. Be prepared for other people who lack your business vision to come up with alarming approaches you’d never have thought of.

 

Do you want employees who represent your company to have green spiky hair and nose piercings? If not, put in a dress code. Do you want to ensure that your business name is associated with 24-hour accessibility? If so, stipulate the hours of operation. Would your business survive if a franchisee trashed your reputation by offering shoddy goods or services? You’d better put in quality control measures, then. The list of things you want to control will go on and on.

 

Just remember that in drawing up your franchise agreement plan, every single word of it will have to stand up in court should you have to pursue legal action against a violator of this contract. For this reason, franchise consultants and attorneys specializing in franchise businesses will be mandatory in all but the most trivial arrangements.

 

The rules of setting one up vary from place to place. In the United States, there’s the regulation of the Federal Trade Commission, which will require you to provide a Uniform Franchise Offering Circular which will contain all of those plans you drew up. You hand this contract over to potential franchisees a minimum of ten days before any contracts are signed. In addition, there are State and local laws with some additional requirements, but those vary. While there is no official federal governing body over franchise agreements, many states and chambers of commerce provide regulation and in some cases franchise disputes have been heard as high as the Supreme Court.

 

In the United Kingdom, franchises are treated differently. Instead of having specific laws that apply only to them, franchises are seen as any other business, although contracts are still enforceable through the law. As for other countries, check with a lawyer local to that area.

 

In a nutshell, franchises are treated mostly as an agreement between two private parties, with some consideration given to local business practices. It’s a lot simpler than some people seem to think.