1.  Have you had franchise inquiries?

One key piece to the puzzle has already been answered: Have customers or other individuals inquired about franchising or expressed an interest in bringing your business concepts to another town? Because one of the secrets to a successful franchise lies in the ability to replicate it, this factor leans in favor or franchising.

2.  Is your business profitable?

Next, examine your profit and loss statement. A successful franchise ensures both the franchisee’s profitability after fees and the franchisor’s profit. Simultaneously, as the franchisor, you should also be profitable. Therefore, your business must already be profitable.

3.  Do you have sufficient capital to cover the costs of franchising?

The initial steps in franchising involve various expenses, including legal fees for drafting and potentially registering franchise documents in certain states, accounting fees for financial statement preparation and auditing, selling expenses such as marketing, lead generation, and commissions for franchise salespeople, drafting an Operations Manual, providing initial training, and supporting franchisees in their business operations.

These expenses require a certain amount of capital. So, the next question to consider is whether you have sufficient capital available to start franchising. If not, can you access the necessary capital. 

4.  Do you have the manpower to support franchisees?

If you are currently running your business alone, working seven days a week, without much assistance, it may not be the right time to franchise. Why? As you begin franchising, you’ll need to support franchisees in various areas, including site selection, suppliers, marketing, operations, and customer service.

To consider franchising, ensure that you either have the time or a capable team in place to not only manage your existing operations but also provide support to potential franchisees in managing theirs.

5. I think I am ready to franchise, what are the next steps?

The first step is to select and register a trademark with counsel through the US Patent & Trademark Office.  A trademark is one of the cornerstones of a franchise, the brand name under which your franchised outlets will operate.

Next, you will need to collaborate with counsel to prepare a franchise agreement and Franchise Disclosure Document, also known as an ‘FDD.’ An FDD is required by federal law to sell franchises in the United States.

You will need to create an Operations Manual, an all-encompassing guide for franchisees on starting and running their business. This manual often doubles as the primary resource for initial training.

Franchising is an exciting long-term journey that many iconic American brands have embarked upon. If you believe you might be ready to franchise, consider these five factors to help with your decision.