Are you a successful business owner with a profitable track record? Do you intend to expand your brand across other US states and cities?
If yes, then franchising your service business would be your best bet.
Do you want to know why?
It is because if you think of expanding by opening multiple storefronts to offer your services in different cities and regions to grow your business, it will add more management responsibilities to you.
Instead, you can start a franchise business model, where you will distribute the management responsibilities to other local businesses that connect to the same business motive as yours.
Moreover, you will surely expand your brand without hampering the service quality.
If you are convinced that your service business is a good candidate for the franchise business model, here are eight steps to get started with your first franchise agreement .
Table of Content
Franchising is the method of distributing services or products by the franchisor. A franchisor is a person who builds the brand and establishes the trademark of the business system. On the other hand, a franchisee or a franchise service business is a local entrepreneur or field service provider who runs the business with the franchisor’s brand name and system.
People are liable to pay an initial franchise fee for taking up the established trademark and business system and also a fixed profit percentage or royalty. Franchising is a tried-and-tested business model that helps the franchise owners acquire a good flow of customers due to the established brand reputation of the franchisors.
To build a franchise brand, you must take the initiative to do the groundwork right. Franchising your service business is a way to expand your operations across various geographic locations. It might be within your state or across other states of the United States. And it will depend on whether people are willing to take this franchise opportunity of your brand across different states.
Irrespective of what you want to achieve by selling franchises for your established business, here are the steps you must follow to execute it with good knowledge and foundation:
If you were working for your business as a sole proprietor, you might have to register or migrate your company as LLC. With this, you will be setting up a legal entity for your business and be liable for getting all the tax benefits. As a sole proprietor, you will miss out on these perks.
You cannot apply for the franchise program as a sole proprietor and must have a legal entity for your business under tax laws to initiate this expansion process. You must choose a registered agent and file the documents needed per your US state to get the LLC entitlement to your company.
A business offering plumbing, painting, landscaping, snow removal, HVAC, and other such services to customers is in high demand across all states of the United States. There is huge competition among the key players in this industry to stay ahead of the crowd.
In the process, companies try to earn more reputation and brand value than their competitors. Hence, this is the initial approach for business owners to set up the base to sell franchises in the future.
If your brand has no value and recognition among the competitors, then there is no point for entrepreneurs and local businesses to believe in your franchise system and buy it. Therefore, run your market research and identify the loopholes that your competitors have overlooked.
You will be on the leading edge if you leverage the opportunity and offer customers what your competitors cannot. You must build a concept and business plan for your pilot approach in the respective industry.
At the same time, determine if the initiative you take is easily adaptable or not. The service franchisees need to understand and find it possible to execute your business system to convince them to buy your franchise brand.
Following that, execute your market research in the location where you plan to launch your new franchise business plan. Determine if there is a need and demand for your services in that area. Check factors such as household characteristics, income levels, and employment rate.
Irrespective of how simple it might seem, running a franchise program is more difficult than running a single business. Therefore, it is advised to hire business specialists to help you design your franchise plan. They will be the consultants to guide you through turning your small business into a franchise brand.
Let your consultants make a bonafide strategy to maintain the primary focus on business goals and objectives. The purpose of introducing a franchise program should be retained within the new business plan. By keeping your values, goals, and objectives of the original plan constant, the consultants or professionals will help you prepare a new business plan, including the franchise model.
The franchise plan for a service business must include:
The operations manual allows franchisees to study how your business operates and serves potential customers. This manual should highlight the system procedures, service business marketing plans, approved suppliers, and operating standards of your business. It is an important inclusion to ensure franchisee satisfaction and proceed further to be the owner of your franchise brand.
Hire a franchise lawyer for your business to take care of your compliances and legalities for the long term. To expand your business with franchise sales, you must produce the right documents to legal authorities.
Consider having a Franchise Disclosure Document (FDD) and a franchise agreement. The purpose of FDD is to inform the prospective franchisees with details on up to 23 service areas of your business. On the other hand, the franchise agreement outlines how you and a franchise owner will conduct the business operations.
The agreement will also list the initial fee a franchisee is liable to pay for entering your business and using your trademark to sell the services. The lawyer you hire will also help you register the trademarks with the US Patent Office with specific clauses to let the legal franchisees use them upon submission of proper documentation.
As stated in Step 1, you need to be an LLC company or a corporation to be able to sell your franchises and offer support to them. Release an application online for the prospective franchisees to fill it, and wait for the franchisors’ response.
You need to give it time and assess all the applications to decide who would be proficient in operating your service business in a different location. The brand reputation is at stake, and a casual applicant can just ruin it. Therefore, take your time to ensure the partnership will reap mutual benefits.
When franchising small businesses, you must offer training development and upskilling support to the franchisees. Hire a franchisee relationship manager to conduct the training on all important aspects of the business, and ensure they offer post-training support for all instances.
Guide them in recruiting employees and management teams to improve the growth aspects of the brand. The franchise sales will be higher if your brand guarantees to offer complete support to the buyers in the long term and keep them updated with the changing business policies.
The success of a franchise chain and its profitability will depend on how you build your relationship with the franchisees. As you are the franchisor, it is your authority to expect quality work execution from the franchisees to maintain the brand reputation.
Check in with your franchise brands and offer mentorship when needed to ensure that your expansion plan doesn’t hamper the brand reputation and customer satisfaction quotient.
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With all the profitable aspects of launching a franchise model of your own business , some downsides need your attention too. To help you understand better, here are the pros and cons of getting into the franchise industry:
No, it is not at all easy to start and execute a franchise program. Apart from its substantial startup costs, there are many other concerns that contribute to its complexity.
Most small businesses intend to start their entrepreneurship journey through franchise brands. Therefore, every small business is ready to take risks with their initiatives, while you won’t want such risks with your brand reputation.
Therefore, a detailed assessment is essential to decide on approving the application of prospective franchise buyers. Be clear about the job responsibilities and duties through a business plan to make them commit to the franchise opportunities.
Some of the most renowned and profitable franchise businesses in the United States are Pizza Hut, Dunkin’ Donuts, Burger King, McDonald’s, and Subway. Even though you only see restaurants in the list of top franchises, it is still not the only trade that can be franchised.
There are two types of franchising: trade name franchising and business format franchising . Depending on that, any service business can be franchised.
When you have successfully made many franchise sales and have many franchisees using your trademark to conduct businesses, guide them to use FieldCamp for their job scheduling and easy operational management.
FieldCamp is an outstanding job scheduling software that allows businesses to schedule their services and assign employees to the task in just a few clicks. It helps streamline service business operations and leaves no room for human errors.
All assigned work will be digitally tracked and updated to ensure customer satisfaction. So irrespective of the number of franchisees you are partners with at multiple locations, you can train them to use FieldCamp and provide the help they need to meet the service demands in the new location.
But before you suggest FieldCamp to any franchise owners, you should try it yourself. Take the 7-day FREE trial and experience the features we offer with our software to implement it in your business operations and pass it on to your franchisees.
Author Bio
Gaurang Bhatt is a techie in himself with an ability to solve problems technically and present solutions in the form of a product. He is one of the pioneers to curate FieldCamp with his 15+ years of knowledge and expertise in providing solutions to home service industries. Gaurang aims to overcome challenges faced by service business owners through software solutions and blogs.
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