Learn what makes a good franchisor and how to get started.
According to the International Franchise Association, there are nearly 800,000 franchises in the United States. And there’s no reason your business can’t be one of them. The space is expected to continue expanding, with a growth rate of 2%, even in an unpredictable market.
Whether you already have a business or not, you may have thought about becoming a franchisor. But how do you know if your business (or business idea) is the right fit to become a franchise? If it does check all the boxes, how do you set it up as a franchise opportunity?
There are franchises in all industries – from business services and real estate to quick-service restaurants and retail stores. Becoming a franchisor allows you to grow your brand and leverage knowledgeable local business owners to expand while sharing the liability. While going the franchise route does compromise control a bit, it affords the opportunity of scalability.
When you lease out your brand to franchisees, you also set yourself up for additional forms of revenue, like royalties, contributions and other fees. Diversifying your revenue stream can be a major motivator to take the plunge.
Before becoming a franchisor, think about whether your business meets foundational criteria that make a franchise successful:
Once you’ve decided you want to become a franchisor, here are the steps to prepare your business:
Even if your business is a good fit for being a franchise, recognize that there are tradeoffs when offering your brand on lease. You may be exchanging the profit of opening your own additional locations for the partnership of other owners.
The bottom line is that diversifying your revenue may make being a franchisor a worthwhile endeavor. Consult with your advisor and other professionals about whether franchising your business aligns with your financial, professional and personal goals.
Raymond James and its advisors do not offer legal advice. You should discuss any legal matters with the appropriate professional. The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation.