How to Franchise Your Business

2007-07-24 08:31:47

( Business )



Options for Your Profitable Business

You had a great business concept and were able to put it into practice by successfully incorporating your business. Since then, you have been operating profitably and your product promises a bright future. You are now ready to take the next big step - expansion.

One option for expanding is to add more equipment or branches to your existing set-up. This requires more capital by either increasing your investment or borrowings. However, you might face opposition from partners or shareholders because it will also mean greater risks.

The other option is to franchise your business. For a specified amount of investment, you allow a franchisee to use your business name and product but operate it as his own business.

The franchisee pays you a fixed amount plus a percentage of his sales. And since the franchisee sells your product, he will also need to purchase all the raw materials and equipment from you. You will also need to train the franchisee and his staff on operational procedures. In return, the franchisee of your business will get to enjoy the profits he will be making.

Advantages of Franchising

You have a definite advantage when you franchise your business. You don't need to shell out more capital, yet there will be more establishments using your name and selling your product. You profit not just from the proceeds of the franchisee's sales, but also by supplying the materials.

As franchisor, you have the authority to monitor your franchisee's activities and inspect his books. You can set all the rules and limitations for the franchisee, especially about selling only your product. You can stipulate uniform health and safety procedures, pricing and promotional strategies in the contract.

Setting Up the Franchise

When you franchise your business, you are actually selling your company and product's reputation. Franchisees want to be sure about the credibility of your business, and the soundness of its management. They need the assurance that you will give them 100% support in providing the right materials and training in a timely and organized manner. You must pass on proven management policies and practices that will in turn enable your franchisees to achieve a high level of sales and profits.

Your product should be very attractive and original if possible, not just a passing fad. There should also be a huge potential market and demand for your product based on reliable research. In fact, part of your responsibility is to assist your franchisee in finding a feasible location for the business.

You need to organize all the paperwork, notably the business plan and operating manuals. You need to have clear breakdowns of all the franchising costs and financial obligations of the franchisee.

Most of all, you need to give yourself guidelines on how to screen out and select franchise applicants who will assure a fruitful long-term relationship.


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