Tuesday, July 19, 2011

How to Start a Small Business Franchise

With the help of a franchise, your small business can benefit greatly. It can get recognition, a market-tested product, a built-in customer base and a wealth of proper advice and training. Small business franchises can carry low financial risks and a higher potential for success. These are the main benefits of opening a small business franchise.

1. Investigate existing franchises. Contact a franchise agent or visit franchise trade shows. Establish a good understanding about the profit margins in your industry and compare the franchising opportunities with those margins. Study trends in the number of new stores opening under the franchise and determine whether they are opening close to your neighborhood. If there are a large number of the same type of franchises opening in your neighborhood, determine whether it is based on popularity and whether opening the same type of small business franchise will be redundant.

2. Compare costs. Franchises are usually costly to start. The upside is that they can provide help along every step of the business operation and promotion. A small business franchises such as an H & R Block can cost $26,000 to $85,000 to start. On the other hand, small commercial cleaning franchises can be up and running with as little as $4,000. Choose the small business franchise that best fits your market and has the lowest start-up costs without hurting quality.

3. Secure financing. Depending on the type of franchise, you may have to get a loan or self-finance. Some small business franchises offer flexible financing options in-house. Inquire about financing opportunities with specific franchise owners.

4. Set financial goals. Set three and five-year financial goals and be clear about when you will start to break even with your small business franchise. Monitor your progress through monthly financial reports and analysis.

5. Sign the franchise contract. Seek help from a lawyer or business consultant if you are unsure of the agreement terms and responsibilities. Franchise agreements can be quite extensive and intricate.

Sunday, July 17, 2011

How to Turn a Small Business Into a Franchise

Turning a small business into a franchise is a complicated task. Consulting firms and franchise attorneys around the country can help with this process, but the service delivered and the fees charged for that service can vary greatly. The biggest issue most new franchisors face is understanding the new business model they have. Franchisors are no longer in the business of servicing customers; they are now in the business of selling franchise licenses to new franchisees and supporting those franchisees in their new business. The success of a new franchisor is entirely dependent upon their franchisees.

1. Prove that your business model works and is repeatable. Before you consider franchising your business you need to prove out your model. The business should be consistently duplicatable and consistently profitable. If you can not create a profitable clone of your business in a new city, then no franchisee will be able to either.

2. Trademark your name brand. An essential component of franchise agreements is the presence of a trademarked name brand. You should pursue a federal trademark for your name brand. State level trademarks are a step in the right direction, but federal trademarks are critical for growing franchises.

3. Develop a Franchise Disclosure Document (FDD) and Franchise Agreement. Franchise laws issued by the Federal Trade Commission require franchisors to give prospective franchisees a disclosure document listing 23 specific items. The format of this document was outlined by the FTC and is used in all franchise systems today. In addition to the FDD, you will need an attorney or franchise consultant to draft a franchise agreement for you.

4. Draft training and operations manuals. Once your FDD and franchise agreement are complete, you will need to create a set of training and operations manuals. Both manuals are referenced in your FDD and contain all of your "trade secrets" on how your business is run.

5. Begin selling franchises. Now that you have all of your documents in place you can begin advertising your franchise opportunity for sale to the public. Be sure to check which states have additional franchise opportunity regulations that you may need to comply with before advertising your opportunity. (source: ehow.com)