Step-by-Step Guide to Franchise Business Model

Franchising is an excellent way to expand your business and reach new markets. It allows you to expand the success of your existing business model, brand, and products and create a network of independent business owners.  These new business owners will operate under your company’s name and systems, providing your services and products to the customers.

If you’re considering this, here is the step-by-step guide to the franchise business model that will help you understand and prepare for future ventures.

Step #1:    Evaluate your business

Announcing a franchise for sale needs careful evaluation of your business to ensure you are ready for this type of growth. This involves determining its strengths and weaknesses, identifying your unique selling points, and ensuring that your operations and processes are easily replicable.

You’ll also need to determine the level of support you’ll provide to your franchisees, as well as whether your business model can be adapted to different locations and markets. Think of franchising as a long-term goal you intend to invest in to make your brand more exposed and more profitable.

Step #2:    Develop a franchise model

A franchise business model should be a part of your business plan and strategy or subsequently added to both, to help you build the potential for franchising well ahead. When doing this, take into consideration the two components of business growth and success:

1.       Increasing the sales volume, and

2.       Increasing profits by reducing costs.

Also, creating a franchise model involves drafting agreements, outlining the fees, creating a royalty structure, and determining the level of support you’ll provide to franchisees. You also need to establish your brand standards and ensure that your franchisees understand the rules of their implementation.

Step #3:    Build a franchise support team

As a franchisor, you need a team to support your franchisees. This team should include a franchise salesperson, a franchise consultant, and a franchise support specialist. For example, a job of an experienced franchise consultant is to advise you on the budget and how much you should control your franchisees.

You may also need legal and financial advisors to help you navigate the complex world of franchising and positioning on the market. Furthermore, your franchise support team will help you recruit and train franchisees, maintain brand standards, and provide ongoing support to your franchise network.

Step #4:    Create a Franchise Disclosure Document (FDD)

Before you can start selling franchises, you need to create a franchise disclosure document or FDD mandatory by the franchising laws in your country. It should outline important information about your business, including the history of the company, the franchise fee, the franchisee’s obligations, and other legally required details.

The FDD is a legal document, so it’s important to work with a lawyer to ensure that it complies with all relevant laws and regulations – domestic and international. Before potential franchisees sign any agreements with you or pay any fees, they need to familiarize themselves with this FDD during the franchise sale process.  

Step #5:    Recruit and train franchisees

Recruiting and training future franchisees may involve advertising your franchise opportunity, attending trade fairs, or reaching out to potential business persons or entities directly. Since the success of your whole franchise system depends on the quality of your franchisees, you need to be selective and unambiguous during this stage.

You should look for entrepreneurs who share your values, as well as have the skills and experience to run a successful business. Once you’ve recruited franchisees, it’s time to train them and provide support to be successful. For example, you need to train them on your business operations and give marketing and advertising support.

Step #6:    Monitor and manage your franchisees

As a franchisor, it’s your responsibility to monitor and manage your franchisees to ensure that they are respecting your brand standards. This may involve regular visits to the franchises, audits, and ongoing communication with your franchisees, so they would provide a high level of service to their customers. 

You should also be open to feedback from your franchise network and be willing to make changes to your business model to improve performance. Additionally, by providing ongoing support to your franchise network, you will resolve any issues quickly, change the less efficient rules, and improve outdated ones.

The bottom line

By following this step-by-step guide to the franchise business model, you can navigate the process of franchising and expand your established brand to other areas, cities, countries, and continents. However, before signing any agreements, you need to do your research, evaluate your business, and consider the profile of potential franchisees. It takes a lot of work to build a franchise empire, but you can achieve this goal by being diligent, patient, and careful.