How to Franchise Your Business in 12 Steps

Your business is booming. Your customers are happy. Your products (or services) are flying off the shelves… For some business owners, it really doesn’t get any better than this. For others, this is only the start of something much bigger.

If you’re in a similar state of mind, you may be toying with the idea of franchising. This allows you to replicate your business success, grow your brand, and increase profits — without having to do all the heavy lifting yourself.

But how do you know whether this is the right decision for you? And how do you even begin to build a franchise network?

In this article, we’ll help you assess your options and teach you how to franchise your business in 12 steps.

The pros and cons of franchising

Much like any big business decision, franchising comes with its fair share of advantages and disadvantages. It’s up to you to weigh up these factors and determine whether franchising your business is the best next step.

To help you make your decision, we’ve compiled a quick list of pros and cons.

Pros of franchising:

• Expand your business faster. As a franchisor, you’re not solely responsible for your growth. Your network of business owners will help you scale profits, enhance brand recognition, and even gain access to new markets.
• Cost savings. In most cases, your franchisees will foot the bill for opening a new unit, meaning you can expand without having to spend your own money. Plus, you’ll receive upfront fees and an ongoing stream of royalty payments throughout your partnership.
• Reduced financial risk. Your franchisees are investing their own money in your business, so needless to say they’re just as eager to succeed as you are.

Cons of franchising:

• Loss of operational control. Although you’ll maintain strategic control and oversight, you’ll lose day-to-day operational control.
• Complicated set up. Setting up a franchise can be cumbersome. You’ll want to consider the complexities and costs involved with seeking legal advice, generating marketing materials, and investing in the appropriate tech stack.
• Compliance and legal risks. As a franchisor, you place a lot of trust in your franchisees. There’s always the risk of non-compliance, quality control problems, or rogue business practices. You also open yourself up to the possibility of a dispute (should you or a franchisee breach the agreement contract).

How to franchise your business: a step-by-step roadmap

Still keen to become a franchisor? If that list of cons didn’t deter you, now’s the time to think about plotting your next steps.

In the following section of this blog, we’ll map out the key stages of the franchising process:

1. Assess the potential of your business

Some businesses are suited to franchising, others aren’t. It’ll save you a lot of grief (and money) if you can assess your viability as soon as possible.

Companies that are prime candidates for franchising have well defined, replicable business models. They’re easy to scale and require very little handholding from you, the franchisor. More than this, they offer products and services that are desirable to both consumers and franchisees.

If your company ticks these boxes, we’d suggest conducting some market research to validate your decision. It may also be helpful to speak with a knowledgeable franchise consultant.

2. Decide your franchise model/structure

Most franchisors choose to operate a business-format model. This is where you package up your business and sell it to prospective franchisees, who can then sell your products and services while receiving support from you.

However, you may opt to follow a different model depending on your business needs and preferences. Some options include:

• Product distribution. In this model, you grant franchisees the right to sell your products or services within a set territory under their own brand.
• Master franchise. This is where you assign franchisees as sub-franchisors (or “master franchisees”), giving them responsibility for an area or set number of franchisee units.
• Manufacturing model. As well as giving your franchisees the right to sell your products, this model permits them to manufacture them too. You provide the operational standards and they fulfill the end-to-end product cycle.

If you want more control over your franchisees, a business-format model may be the best choice. However, if you’re more lax, a product distribution or master franchise model may suffice. Again, it’s completely up to you and your franchising vision.

3. Establish your franchise’s culture and purpose

Strong brand presence is a key success indicator for profitable franchises.

But branding isn’t just about font choices and logo colors; it’s the heart and soul of your business. It comprises your purpose, values, mission, and culture.

All of this is key to not only succeeding in the consumer world, but attracting franchisees and growing your network. So, before progressing with franchising, ensure your brand is strong, relatable, and engaging. You want to be as recognizable as the McDonald’s ‘M’ arch, with an ethos as infallible as Ben & Jerry’s.

4. Deal with the legalities

You’re not selling lemonade here. The process of setting up a franchise isn’t as simple as squeezing some lemons and building a few plywood stands. It requires extensive legal preparation.

Rules for selling franchises can vary from country to country and state to state, so it’s worth consulting a legal professional during this stage. That being said, some of the legal obligations you’ll have to fulfill will include:

• Trademarking your company and any intellectual property, if applicable.
• Creating and registering a franchise disclosure document (FDD).
• Preparing an operations manual for franchisees, as well as franchise agreements.

You may also wish to draft confidentiality agreements and/or deposit agreements to protect your business further.

5. Determine your fees and royalties

Next, you’ll need to consider the financial side of your franchisor-franchisee relationships. Beyond determining your initial one-off agreement fee, you’ll also want to calculate expected royalties and how you expect them to be paid.

For instance, will you charge a percentage of a franchisee’s revenue or will you ask for a flat fee? And will you require a payment every month, every quarter, or annually?

6. Create your operations manual

Your operations manual contains everything your franchisees need to replicate your success, meet your operational standards, and sell to customers or clients in the right way.

This manual should balance detail with readability. You don’t want to miss any important nuances, but you also don’t want to send your franchisees to sleep.

We’d recommend chunking out this guide into dedicated sections, as well as digitizing it using a mobile-accessible, AI-powered franchise management software. That way, franchisees can easily access policies, instructions, and guidance at any time — and ask for AI assistance if needed.

7. Develop engaging franchisee training

Training is fundamental to your franchise’s success, so make sure you create and deliver it with care.

Treat it the same way as you would driving lessons. You don’t want to rush it all at once or bombard your franchisees with every possible risk, regulation, and tool (and so on and so forth). That’s just asking for a crash, isn’t it?

Instead, create dedicated e-learning pathways that franchisees can take in their own time. Your franchise training program should cover:

• Legal considerations, including your franchise agreement, trademarks, dispute resolution procedures etc.
• Your products and/or services.
• How to access and use your operations manual.
• Your brand, culture, and values.
• The automated processes and systems you use.
• Data security and privacy.
• Other compliance training, including health and safety.

Housing this training on a franchise training LMS will not only support remote learning, but also help you track completion and pass rates. This is crucial for highlighting gaps in your franchisees’ knowledge that may cause issues later on.

8. Select the right franchise management software

We’ve mentioned the importance of digitizing your operations manual, content, and training pathways a number of times now. But it’s no good digitizing these materials unless you have a reliable platform to house them in.

That’s where franchise management software (FMS) comes in.

An FMS acts as a secure, centralized hub for all your documents, policies, training, internal communications, automated processes and more. You can harness it to communicate with your franchisees, get a quick overview of unit performance, and execute your day-to-day processes compliantly.

At Claromentis, we provide an integrated solution that comprises an AI-powered franchise intranet, a no-code automation platform, and a SCORM-compliant learning management system. However, it’s important to remember that not every vendor will offer this level of features, so do your research before making your decision.

9. Advertise your franchise opportunity

At this stage, you should have completed all of the foundational work. Now it’s time to find the right franchisees and build your network.

With the help of your refined brand messaging, advertise your franchise opportunity across:

• Your website
• Social media channels
• Interactive webinars
• Franchise directories and associations
• Paid advertising channels
• In-person events and conferences

When leads come through, make sure you have your FDD and a repository of helpful resources on hand to nudge them closer to the buying stage.

10. Onboard your franchisees

Once you’ve devised your franchise agreement and the sale is finalized, you’ll need to onboard your franchisees and get them up to speed.

• Facilitate introductions with the appropriate team members on each side.
• Invite your franchisee into your franchise management software (if you’re using one) and assign them the appropriate user permissions.
• Direct them to your operations manual, brand assets, policies, and e-learning resources.
• Begin conversations around unit provisioning, launch events, and hiring.

It can be helpful to use a project and task management tool to organize these tasks. This allows you to track progress, check-in with your franchisees, and ensure no stone is left unturned.

11. Build strong relationships with your franchisees

Don’t cut your franchisees loose once they’ve completed the onboarding stage. To ensure the ongoing success of your franchise, you’ll need to develop a genuine, collaborative relationship with them. This is vital for maintaining compliance, adapting to market changes, and driving sales.

Here are some ways you can build stronger relationships with your franchisees:

• Share news updates and blogs to keep your franchisees informed.
• Celebrate high-performers with badges and public thank you messages.
• Communicate directly via in-system messaging or external messaging apps.
• Create collaborative forums for franchisee-franchisee discussions.
• Send quarterly surveys to monitor engagement, understand sentiment, and capture new business ideas.
• Streamline tedious processes, such as inventory management and health and safety assessments, with automated e-forms and workflows.
• Organize in-person events.
• Establish a franchise advisory council.

12. Stay adaptive

Change is inevitable, and your business won’t always be booming. As a franchisor, you have to anticipate and adapt to these changes from day 1.

Regular communication with your franchisees will highlight any problem areas, such as labor shortages, supply chain delays, or encroaching competitors. You can imbue these qualitative insights with data-driven dashboards, gathered from your franchise software and integrated third-party tools.

With these insights to hand, you’ll be better able to assess unit performance, navigate change, and pivot your business if necessary.

A fuss-free approach to franchising your business

Franchising a business is no small task. So, if you’re confident it’s the right move for you, you’ll need to find ways to make the process as easy as possible — both now and in the future.

Beyond reaching out to franchise consultants, solicitors, and other franchisors for advice, start looking for a robust platform to orchestrate your efforts.

With a comprehensive franchise management software like Claromentis, you can build, manage, and grow your network with ease.

• Design a brand-aligned franchise intranet that your whole network can access. You also have the ability to create personalized themes and/or sub-sites.
• Communicate with your franchisees via engaging internal communications tools.
• Store your business critical policies, brand assets, and documents in a secure, centralized hub.
• Create, distribute, and track e-learning courses for onboarding and upskilling.
• Build automated processes for registering new franchisees and streamlining tedious manual work.

Our software is one-of-a-kind and packed full of features. To get a thorough overview of the solution, book a personalized demo with one of our experts here.