New to franchising? Do you want to learn more about franchising your business, where to start, the steps, and how to know if you are doing it right?
This tutorial will teach you about franchising, how to franchise your business, and how to franchise well.
We’ll also go through the legal criteria for franchising, the methods involved, and how to sell franchises.
Introduction: What Is Franchising?
Franchising is a legal and Franchising Your business connection that can aid in the growth of your company.
A franchise is formed through a legal arrangement that includes the licencing of a trademark, the payment of a fee, and control over a Franchising Your business’s activities. When you franchise your business, you will create the legal documentation, pre-sale disclosures, and operational requirements required to comply with franchise regulations and sell franchises to individuals who will become your franchisees.
As a franchisor, you will provide franchisees the authority to develop and create new sites while utilising your trademarks, Franchising Your business processes, suppliers, training, and ongoing support. Franchisees will pay you fees that include an initial franchise fee as well as ongoing royalties, as well as the capital required to build new sites under your brand. When done correctly, franchising results in win-win situations.
If you want to franchise your business, you’ve come to the perfect location. This guide will provide you a thorough understanding of franchising, put you on the proper route, and assist you in franchising the right manner. If you’re worried about doing things correctly and avoiding mistakes, you’re not alone; we’re here to help.
- What Are the Franchise Laws and What Is a Franchise Disclosure Document?
- Does My FDD Have to Be Registered or Filed?
- How Long Should It Take to Franchise My Business?
- How Much Should It Cost to Franchise My Business?
- Essential Strategies to Consider Before Launching Your Franchise
- Developing Your Franchise Sales Marketing Plan
- Is Licensing an Alternative to Franchising?
- Do I Have to Work with a Franchise Lawyer?
- Can a Franchise Developer or Consultant Prepare My FDD Instead of a Franchise Lawyer?
- How Do I Get Started?
What Are the Franchise Laws and What Is a Franchise Disclosure Document?
Franchising is regulated, and compliance with federal and state franchise regulations is required.
The franchise disclosure document, often known as the FDD, is the legal document required when selling franchises. It is required by federal and state law and serves as the legal basis for your franchise. You must provide your FDD to prospective franchisees at least 14 days before executing any agreement with a franchisee or taking any payments from a franchisee.
What’s in the FDD?
The FDD is divided into 23 mandatory components, each of which is referred to as a “Item.” Each Item is designed to educate a prospective franchisee about you, your franchise, and the legal obligations you and your future franchisees will have. This provides information on royalties, territories, and startup fees, among other things.
Simply put, it is all of the legal paperwork that must be completed before you can offer or sell a franchise.
Do I Have to Update My FDD Annually?
Yes. Your FDD must be updated at least once a year. Before you can offer or sell a franchise in a franchise registration state, the FDD must be authorised and registered with state regulators. Some states may need franchise or Franchising Your business opportunity registrations before you can sell a franchise. Find out when an FDD expires and needs to be updated.
What are the Steps to Take to Franchise a Business?
When you franchise your business, it implies you’ve completed the legal and business procedures necessary to sell franchises, assist franchisees, and build your brand. First and foremost, your franchise lawyer must create and issue a Franchise Disclosure Document in accordance with federal and state law. In states that require FDD registration and filings, you must additionally register or file your FDD with the state in order to offer franchises.
Determine if franchising is a good fit for your company.
Your company, Franchising Your business methods, and personal ambitions must all be in sync with franchising. As your brand expands, you will be responsible for recruiting, training, and supporting franchisees.
Franchise Disclosure Form
Your FDD should be tailored to your company and the franchise that you are offering in order to comply with federal and state franchise rules.
Franchising Your Business Operations Manual
You will provide your franchisees with a confidential operating handbook. Your operations manual should document and advise franchisees about the system needs and information required to establish, open, and operate the franchised business.
Register Your Trademarks
Your trademarks must be registered with the United States Patent and Trademark Office. More about trademarks and what can happen if they are not registered can be found here.
Establish Your Franchise Company
You’ll need to form a new franchise business, which is usually a corporation or limited liability company. Your new franchise company will be in the Franchising Your business of selling franchises, assisting franchisees, and developing growth methods.
Register and File Your FDD
You must file the necessary applications and notices before selling franchises in franchise registration states (CA, IL, MD, NY, VA, etc…) or franchise filing states (FL, NC, SC, TX, etc…). Learn more about state-specific regulations, registration, and filing procedures by using our interactive franchise registration registration map.
Create Your Franchise Sales Strategy and Set a Budget
Even after your legal documents are completed, it is vital to determine your initial franchise sales strategy and create a budget. Assess your target franchisees, target markets, franchise interest, and a reasonable budget for attracting, training, and supporting franchisees.
From where you are now to being a franchisor legally able to market and sell franchises, the franchise development process normally takes 90 to 120 days. However, after you “franchise your business,” you’ve only just begun.
Does My FDD Have to Be Registered or Filed?
The answer is dependent on where you intend to offer and sell franchises. The FDD is not registered or filed with any government entity at the federal level. Although your FDD must conform with federal law and the Federal Franchise Rule, compliance is self-regulating, which means you and your franchise lawyer are responsible for ensuring that your FDD is correctly produced and issued. At the state level, before you can offer or sell a franchise in a franchise registration state, your FDD must be registered with the relevant state regulator.
Before providing or selling a franchise in the franchise filing states, you must submit particular filings with the authorised state regulator. All other states allow you to offer and sell franchises as long as your FDD is up to date and in accordance with federal law.
For a list of “franchise registration states” and “franchise filing states,” see the glossary below, or visit our interactive franchise map to learn more about each state and its franchise requirements. Also, find out where the FDD is registered and lodged.
How Long Should It Take to Franchise My Business?
Typically, it takes 90 to 120 days to franchise your firm. Variations may occur depending on specific aspects connected to your business or industry. A lot also depends on the people you’re working with and the people on your internal team.
How Much Should It Cost to Franchise My Business?
This is ultimately determined by the people with whom you collaborate.
When determining the cost to franchise your firm, it’s critical to understand that the franchise development process is divided into two stages:
Stage 1: The franchise development stage is the stage in which you take the legal and Franchising Your business measures required to identify yourself a franchiser and begin selling franchises. Major milestones throughout the franchise development stage include writing and issuing your FDD, producing your operations manual, and competitively assessing your franchise offering in comparison to your competitors.
Stage 2: The Franchise Sales Stage, the initial franchise sales process during the next 12 months following the issuing of your FDD is referred. During the first stage of franchise sales, you will take measures to sell franchises using various marketing channels such as organic attraction, paid advertising, social media marketing, public relations, and franchise brokers.
What you’ll discover is that the franchise growth process is an ever-evolving process that occurs over time as you grow and strengthen Franchising your business system.
When we talk about the cost to franchise your business, we’re talking about the franchise development process (Stage 1), which includes: (a) competitively positioning your franchise offerings and the underlying rights and obligations between you and your franchisees, (b) preparing your FDD and the entire legal infrastructure required to become a franchisor and start selling franchises legally and correctly, and (c) developing your operations manual. We’ve seen costs ranging from $18,500 to $84,500 to have this done, depending on who you engage with and whether you produce your own operations manual.
What Determines this Big Variation in Price for Franchising Your Business?
It all relies on who you deal with and whether they are interested in a long-term relationship and fair pricing. When choosing a lawyer or franchise developer, exercise extreme caution. Many vendors rely on the fact that there are aspects of the process that you, as a soon-to-be new franchisor, are unaware of. Some sellers will overcharge you or, worse, undercharge you without your knowledge because you are not doing things correctly. Be wary of “franchise developers” that claim to handle everything in-house, including the legal drafting of your FDD.
It is prohibited for a franchise developer to prepare your FDD with their own “in-house” lawyer. Your franchise lawyer must be independent and directly retained by you for a variety of reasons, including your legal protection, accountability, and the requirement to maintain attorney-client privilege. You should be aware that they professionally support the judicial system.
You should be aware that they professionally stand behind the legal advice and guidance they provide to you.
Lower-cost solutions (in the $5,000 to $10,000 range) will wind up costing you more in lost opportunities and future franchise violations. On the other hand, higher-priced options ($80,000+) frequently give a lot of “paper and forms” but not much value.
Other expenses include the creation of your operations manual. Many of our customers create their own operating manuals. Most developers charge between $15,000 and $20,000 for this service.
The Internicola Law Firm, P.C. costs between $18,500 and $34,000 for legal counsel in addition to franchise development, planning, and assistance.]
Before hiring a team to grow your franchise, do your research and seek for transparency. Request a complete proposal as well as client references!
Learn more about the stages of franchise development and how much it costs to franchise your firm.
5 Essential Strategies to Consider Before Launching Your Franchise
It is critical to evaluate and apply the following tactics and best practises during the franchise development stage:]
Set Realistic Goals.
Franchising is a marathon, not a sprint. Set attainable goals for yourself in terms of franchise success. What are your realistic sales targets for the first year, as well as the next two, three, four, and five years? Before you open your franchise, you should begin designing your five-year strategy.
Research Your Competitors.
You must position your franchise offering competitively among your competition. You will disclose important cost metrics in your FDD and franchise offering, such as the initial franchise fee, ongoing royalty rate, franchisee fee obligations, territory sizes, and a variety of other legal and Franchising Your business factors that will influence the profitability of your franchisee’s operations and their overall rights. Evaluate your competition, learn about their metrics, and collaborate with your lawyer to ensure that your FDD is competitively positioned.
Franchising Your Business Create a franchise offering that is suitable for both individual and multi-unit sales.
It is critical to be able to sell several franchise units to a single franchisee. What exactly does this mean? Franchisees frequently desire to purchase the right to develop and build many locations, as well as operate in multiple areas. That is, they do not wish to be limited to a single region or territory.
To be able to offer and sell both solitary unit franchises and multi-unit franchises, your FDD must be structured to allow for the sale of a single franchisee. When a franchisee only desires one location, he or she enters a single franchise agreement. A development agreement is issued to a franchisee who want to purchase the opportunity to open several sites. They will also be given a timetable that will allow them to construct their extra locations. This is referred to as a “dual structure.”
Creating this dual structure will require more upfront planning and labour, but for the great majority of sectors, not having the option would lose you sales and put you at a competitive disadvantage in the long run.
Check to see if your FDD is state-compliant.
Being delayed and unable to sell within the expected timeline is one of the most aggravating things for franchisors. Your FDD must be multi-state compliant from the outset. This implies that it should be ready for registration and filing in all states. How should this be done? As previously stated, your lawyer must construct your FDD on a “multi-state” basis.
That is, your FDD should include required addendums and amendments on a state-by-state basis to ensure compliance with various state regulations. This is especially crucial in states where franchise registration is required. You risk compliance issues and significant barriers to future franchise sales if you do not have this level of multi-state compliance.
Learn Franchising and Get Involved in the Franchise Community.
Take advantage of this time to learn more about the franchising process. Participate in franchise events. During your development calls and meetings, your franchise lawyer should be helping you learn about franchising and getting you engaged with franchise groups, networking events, masterminds, and other professionals and suppliers who will be useful once your franchise debuts.
Tip: Talk to other franchisors and always plan your next steps.
Developing Your Franchise Sales Marketing Plan?
There are numerous moving components involved in selling your first franchise and developing a pipeline for future franchise sales. It is necessary to have a marketing strategy in order to sell franchises at a low cost.
The following are some of the initial questions you should be answering as you begin constructing a franchise sales marketing plan:
- What are my franchise sales goals over the next 6 to 12 months?
- What are the qualities and characteristics of my perfect franchisee?
- What is the value proposition of my franchise, what makes my franchise unique, and how can my franchise improve the lives of my franchisees?
- How much money am I going to invest in franchise sales over the next 6 to 12 months?
- What outside vendors should I be relying on to generate interest in my brand and to help me attract qualified franchisees?
- Does my website uniquely communicate my brand story and the advantages of becoming a franchisee in my system?
- Does my website include a lead capture form that encourages prospects to identify themselves and reach out for more information?
- Do we have a franchisee discovery and conversion process in place to inform and educate the prospect about our brand, the advantages of becoming a franchisee with us, and what success can look like for them?
The answers to these questions will allow you to begin constructing the structure for your initial franchise sales marketing plan and brand positioning. These questions are intended to get you started, and you’ll discover that your responses to these questions will evolve, adapt, and get more polished over time, eventually leading to many other questions and franchise sales development processes.
Following that, we’ll go over how to position your franchise brand with the right value proposition. This is one of the most important marketing chores you must complete. Even if you work with a marketing team, as the founder or leader of your franchise brand, you must be actively engaged in this process or risk making one of the most common and costly marketing blunders made by start-up and emerging franchise businesses.
Position Your Franchise Brand and Build a Franchise Brand Story?
Before you invest money on franchise sales promotion, you must avoid this mistake: the mistake we’re about to describe is committed not only by new franchisors, but also by large franchise brands and franchise marketing firms. This error will result in the waste of marketing dollars, the loss of franchisee conversions, and poor decisions regarding the effectiveness of franchise marketing channels available to you.
You may believe that this error is simple and obvious, but it is not. In reality, the majority of franchisors make this error, which is why the marketing for so many franchise companies – regardless of industry – sounds the same. While larger franchise businesses can afford to make this error, start-up and developing franchisors like you cannot.
This is due to the fact that your marketing budget is restricted, and your marketing dollars must generate results during the early stages of your franchise business. You’d think that franchise marketing firms would assist budding franchise brands in avoiding this blunder, but they don’t. In fact, they frequently contribute to its continuation.
So What’s the Mistake?
The mistake is that emerging franchisors like you begin spending money on marketing – whether pay-per-click ads, franchise sales web portals, joining broker organizations, attending trade shows, etc. – without first taking the time to develop, understand, and communicate their brand storey, the value proposition that their franchise system offers franchisees, and why their franchise is unique for the right franchisee.
If you make this error, your marketing expenditures will be squandered on cookie-cutter “me too” franchise sales marketing strategies and media that will either fail or result in exorbitant franchisee conversion ratios and prices.
It takes time to develop your franchise brand’s brand storey and distinctive value proposition, so get started soon. If done correctly, you will attract qualified franchisees by magnetising your marketing. We strongly recommend that you read Donald Miller’s Building a StoryBrand and attend the StoryBrand workshops for more information on brand positioning.
Evaluate These Franchise Sales Marketing Channels?
Begin examining these franchise sales marketing channels once you’ve developed your company’s value proposition and created your brand storey. Some of these channels may be appropriate for your franchise, while others may not. Finally, you can’t rely on just one, so we propose developing a healthy blend of what works for your brand, industry, and franchise sales goals.
Franchise Brokers and Broker Organizations
Franchise brokers and brokerage firms play a significant role in the franchise sales process. Franchise brokers are often members of bigger professional organisations who help potential franchisees identify a franchise opportunity that suits their interests and available capital.
Working with franchise brokers has the advantage that good brokers and organisations often produce qualified franchisee prospects who close deals.
The disadvantage of working with franchise brokers is that their fees are expensive, generally averaging 50% of the initial franchise cost. Furthermore, some broker associations require membership fees to become a member of their organisation.
Our Recommendation: Finally, we advocate collaborating with trustworthy franchise brokers to meet a portion of your franchise sales goals. We feel that the benefits of partnering with a professional franchise broker outweigh the expenses you will pay. You should be wary of franchise broker groups that charge significant upfront entrance fees for joining their organisation as a brand that their brokers would show to prospective franchisees.
Franchising Your Business Organic Web SEO (Search Engine Optimization)
Creating a website and a digital presence is a long-term endeavour. Begin by adding a franchise opportunity page to your current Franchising Your business website. The webpage should be centred on your brand’s value proposition and brand storey, and it should feature a lead capture form where a prospect can input their email address and contact information in return for more information. You could eventually create a separate franchise sales webpage. In either case, you will need to create online content that will eventually help produce organic search engine traffic.
The benefit of generating franchise sales leads through organic site traffic is that it is inexpensive.
Disadvantage: While there is no disadvantage to generating sales leads through organic web traffic, it does take time. Your website will not generate leads immediately, and quantifiable results may take months or years to achieve.
Recommendation: It’s a win-win situation to invest in and create unique quality content for your franchise sales web page or website. Although it will take time to generate web traffic from organic search results, the content you create will also serve as an important conversion tool for prospective franchisees who learn about your franchise through other marketing channels. For example, if a franchise broker refers a prospect to your website, the web content will play an important role in the prospect’s decision-making process.
Franchising Your Business Paid Web (Pay-Per-Click Ads)
Pay-per-click (PPC) ads on Google and other search engines are quite simple, and many companies offer support in managing AdWords campaigns. As a new franchise brand, the most critical issues you’ll have to address are whether, when, and how to use AdWords advertisements effectively in your franchise sales promotion.
We do not recommend AdWords campaigns within the first 12 to 18 months of your franchise offering, as you will see in our recommendation below, unless you have an extremely targeted AdWords campaign (i.e., a campaign targeted to a specific subset of qualified prospects within a concentrated geographic area).
Benefit: Pay-per-click advertisements can drive rapid traffic to your franchise sales website.
Disadvantage: Pay-per-click ads are incredibly expensive, necessitate a significant budget, and are likely to yield a negative return on investment for new firms.
The possibility of a negative ROI stems not only from competition and high cost per click, but also from the fact that most emerging brands lack the conversion systems (i.e., compelling brand storey, value proposition, conversion process, dedicated landing pages, and follow-up drip campaigns) to maximise the value of each click.
Our Recommendation: We do not recommend pay-per-click ads for most emerging franchise brands until your brand is seasoned and you have the right conversion systems in place (i.e., compelling brand storey, value proposition, conversion process, dedicated landing pages, and follow-up drip campaigns) to maximise the high cost and value of your pay-per-click ad. When your franchise brand is ready for pay-per-click ads, begin with limited and targeted campaigns that target a subset of potential franchisee candidates in a specific geographic area. Additional Suggestions:
Use Landing Pages It’s critical to create and employ specialised online landing pages for all web campaigns, whether they’re Google Ads or paid social media ads. Rather than linking paid advertisements to your home page or the general franchise sales page of your website, link paid ads (pay-per-click ads and paid social media ads) to specific landing pages that feature material tailored to the ad and allow you to track the efficacy of your marketing campaign.
You’ll want to A/B test different landing pages over time to evaluate what messaging performs best and which paid media gives you the most qualified franchisees. One of the most common mistakes that new franchise companies make is investing money on pricey pay-per-click ads and other paid media without first building specialised landing pages to monitor and measure campaign performance.
Unbounce does an excellent job of explaining what landing pages are and how to structure them if you want to learn more about them.
Focus On Collecting Prospect Information – One of the most common mistakes franchisors make when using sponsored ads is expecting the ad and landing page to accomplish too much. Your pay-per-click ads should not be used to sell a franchise, but rather to expose your franchise opportunity to qualified prospects and urge them to fill out a contact form to learn more about your franchise. Once you have the prospect’s contact information, you may launch a more active drip campaign in which you speak with them, provide extra information, invite them to webinars, send them information packets, and engage in more targeted communication.
Organic Social Media
Creating content and engaging prospective franchisees organically (i.e., without paid ads) through social media channels like Instagram, Facebook, LinkedIn, and Pinterest is cost-effective and crucial to franchise sales, just like your organic web approach.
The benefit of franchise sales leads acquired through organic social media is that they are quite cheap. You can use social media to expand your existing fan base and target franchise sales to those who are already familiar with your brand and Franchising Your business.
While there are no disadvantages to generating sales leads using organic social media, increasing sales organically takes time and requires persistence.
Our Advice: Expanding your social media presence is a critical effort that provides a win-win situation. Although your organic audience will be limited at first, posting on your social media networks is inexpensive and serves as an important validation tool for prospective franchisees who hear about your brand through other marketing channels.
Paid Social Media Ads
Paid social media advertisements represent a terrific opportunity to reach targeted consumers as you establish your social media presence and organic audience.
Advantage: Paid social media ads are great at creating an audience and allow you to target certain populations.
Disadvantage: Social media ads, like pay-per-click ads, can be costly and require careful management.
Our Recommendation: Paid social media ads represent a unique opportunity for emerging franchise businesses when managed effectively. If you have invested time and effort in developing your website, organic social media, and positioning your franchise brand and brand storey, social media ads can be quite beneficial in assisting you in selling franchises. Your social media marketing should be targeted to subsets of demographics of people who share similar hobbies, vocations, and abilities to ideal franchisees for your system.
Franchise Public Relations
Public relations is concerned with increasing your franchise’s brand visibility and telling your brand’s narrative in media outlets such as national and local news, periodicals, and specialised publications. Public relations may involve a local media outlet addressing the opening of a franchise location in a specific area, internet articles about your franchise brand, and even national television appearances that link your brand to other news events.
Advantage: Exposure through public relations-driven media appearances will promote interest in your franchise brand and increase your brand’s reputation with franchisee prospects.
Disadvantage: Although public relations appearances are technically free (you do not pay the media outlet for the appearance or piece), it is still pay-to-play because you will need to employ and pay a good public relations agency to acquire media exposure.
Our Suggestion: Include public relations in your franchise sales strategy. Good public relations placements will not only build interest in your franchise brand, but will also provide third-party validation that will aid in the franchisee conversion process.
When hiring a PR firm as an emerging franchise brand, it’s critical to create clear expectations about the types of media placements that the agency can and cannot produce for you, which will also rely on your company, the industry you’re in, and how compelling your brand storey is or isn’t. When analysing the costs and possible return on investment, investing in PR is a long-term process; it may take many months before it generates sold franchises, therefore it’s critical that your PR placements also serve a role in authenticating your brand for your franchisee prospects.
Franchise influencers are credible authors, digital content curators, and bloggers with specific knowledge and a following in the franchise community. These influencers provide valuable and credible information to potential franchisees, as well as assistance in delivering exposure to franchisors and franchise brands within specific boundaries.
Advantage: Reputable franchise influencers can provide your business with quick legitimacy.
Disadvantage: If you deal with a recognised franchise influencer, there are no downsides as long as the fee charged to you is reasonable.
Our Recommendation: Establishing relationships with and working with franchise influencers is a good idea. Depending on who you are working with, the relationship may involve guidance and aid with brand positioning and possibly brand promotion. Check out The Franchise King® for fascinating insight into the work of one of the top franchise influencers.
Online Franchise Portals
Online franchise portals are websites that offer a variety of franchise brands and promote themselves as a resource for people looking for franchise possibilities. To drive traffic to their websites, many online portals employ organic SEO and pay-per-click advertising.
Prospects are then urged to register their information and are presented a variety of franchise brands and opportunities. Online portals make money by charging franchisors like you a charge to be listed on their website, as well as fees for you to acquire prospective franchisee leads from the portal, i.e., you buy leads made out of information entered by prospects on the portal site.
Advantage: Technically, the leads you acquire are somewhat qualified in the sense that they should come from someone who is actively looking for a franchise.
Disadvantage: Many leads may be low-quality, resulting in a low or negative return on investment when compared to money spent on relatively qualified franchisee leads.
Our Recommendation: At this time, we do not suggest web portals for new franchisors.
What to include on your franchise website or page:
Form of Contact You should always provide users the option of filling out their information and contacting you right away. Your contact form should be easily accessible. You may simply want to ask prospects for basic information at first (name, email, states they are interested in opening a franchise in). How do you persuade prospective franchisees to provide you with their contact information? Distribute a downloaded copy of your Franchise Opportunity Guide to them.
Proposition de valeur Once you’ve determined what makes your franchise opportunity distinctive, your website is the ideal place to showcase it. How would your franchise change the lives of your ideal franchisees and assist them in reaching their financial goals? Remember to avoid common differentiators in order to stand apart from the pack. Begin with a solid foundation then gradually expand your site.
Franchise Opportunity Guide. This is sometimes referred to as a franchise brochure. It should essentially be a digital guide regarding your franchise offering that prospects may download or print. You can hand these out at trade exhibitions like the International Franchise Expo and should have them on hand for good prospective franchise purchasers.
Video According to Word Stream, there are startling data that demonstrate the importance of video for websites. A personal video introducing yourself and your franchisees can be quite beneficial in converting your leads.
Is Licensing an Alternative to Franchising?
No, licencing is not a substitute for franchising. Sometimes, due to poor legal counsel or a lack of information, business owners enter into a licencing agreement assuming that it is not a franchise and so do not need to go through the franchising procedure.
Here’s the catch: every franchise comes with a licence. Because the concept of what “creates a franchise” is so broad, licence agreements can result in franchise liability and serious legal concerns. If you enter into a Franchising Your business relationship that includes (a) the licence of a trademark, (b) the payment of a fee, and (c) an arrangement where you will have a level of control over how someone manages their business, the business relationship is a franchise, and you must comply with franchise regulations. Learn more about the distinctions between licencing and franchising.
Do I Have to Work with a Franchise Lawyer?
If you want to franchise properly, you should consult with a lawyer who specialises in franchising and has expertise working with new and developing franchisors like you.
The rationale is simple: everything you will do as a franchisor – from franchising your business to selling franchises – is governed by federal and state franchise laws and necessitates substantial coordination and integration into your FDD and franchisee agreements.
Your franchise agreements and the legal duties between you and your franchisees, including your franchisee’s ongoing obligations to pay you royalties, will be your most essential “asset” as a franchisor. If and when you decide to sell your franchise system or take on private equity investors after years of growth, you’ll be glad you didn’t cut shortcuts on your legal requirements.
A skilled franchise lawyer can guide you through each stage of the franchise development process and give you with franchise development insights and ideas that have succeeded for other brands.
He or she will also assist you in avoiding the blunders and hazards of franchising that many new franchisors are unaware of or discover too late. Be wary of “franchise consultants” who claim to be lawyers or to have lawyers on their team. However, what these consultants are actually doing is practising law illegally and causing harm to many unwary start-up franchisors who are unaware of the legal significance of their FDD and future franchise agreements.
The good news is that there are some excellent franchise legal companies available. The perfect lawyer for you should understand Franchising Your business, believe in your goals and vision as a brand and founder, and have processes in place to advise and assist you in franchising properly. Learn more about choosing the proper franchise lawyer in our Guide to Choosing a Franchise Lawyer.
If you have already sold licences, the good news is that your licence system can be converted to a franchise system.