bobohio235 asked:


I own a pizza shop that has been around since 1973 and I’m interested in franchising it. I wanted to know how difficult this would be and the pros and cons.

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One Response to “How do I franchise my business?”

1. AllBusiness Editors on July 24th, 2008 4:29 pm

   ~Franchising your business has tremendous advantages, from a higher return on investment (ROI) to risk reduction and retention of capital. But before you begin the process of franchising your business, you must first determine if your concept and operating system are franchisable.

   Basic tenants of franchisability include:
   —Credibility. A franchisor must be credible to prospective franchisees.
   —Uniqueness. Your business must have sufficient differentiation from other franchises either in terms of products and services, marketing, lower investment cost, or target market.
   —Straightforward operations. Your system and business model should be relatively easy for a new franchisee to learn in a short time frame.
   —Adaptability and demand. Your concept should adapt well to many locations and there should be sufficient demand for your products/services.
   —ROI. A franchised business should have enough profit after paying fees and royalties to earn an adequate return on investment.
   —Strength of management. Even the most successful company will falter without a strong management team in place.

   If your business passes this litmus test, you will need a franchise plan and a business plan. A franchise plan is not the same as a business plan. Essentially, the franchise plan is a plan for franchising your business, detailing all of the steps you will take, as well as the franchise fee. The business plan outlines your overall business strategy over the next five years.
   Next you will need an operations manual and training programs for your franchisees. In order to legally sell franchises, you must draft a franchise agreement and a Uniform Franchise Offering Circular (UFOC) and file with the appropriate state and national authorities. A franchise attorney can help you create these documents and meet the legislative requirements.
   One of the main reasons franchising is attractive to franchisees is that they are buying the rights to use an established trademark and/or brand name. If you have not already done so, make sure that your intellectual property rights are available and register them.
   In order to sell franchises, you will need a marketing plan. Marketing efforts could include a sales campaign, such as direct mail initiatives, franchise sales brochure and collateral, a sales videotape, a Web site with franchising information, paid placement on franchise opportunity Web sites, listing with a franchise brokerage firm, and trade show participation.

   ~Franchising your pizza shop has both advantages and disadvantages. To help you decided what’s right for you, we’ve listed these pros and cons:

   The Advantages:
   Advantage #1–The Experience of the Franchisor
   When an individual buys a franchise, he purchases the years of experience and the proven methods of the franchise system, also known as the franchisor. One franchisee expressed it this way: “What I have learned from the franchisor was worth ten times what I paid for the franchise.” In any new business, much time and money are spent in trial and error. A proven franchise may eliminate many of the start-up problems. This reason permits one to open a franchise business with little or no previous experience in a given industry.
   Advantage #2–Training
   A franchise system will provide training for the new franchisee. This is usually done at the home office and at the franchisee’s place of business. This training should prepare the new owner in all facets of the business.
   Advantage #3–Buying and Advertising
   Most small-business people cannot afford to inventory products in bulk or do extensive advertising. The franchisee buys this advantage when he or she purchases the right to use the franchise system’s purchasing power and advertising. Most systems provide advertising help and direction. Furthermore, as the number of franchisees increases, so does public awareness of the franchise. This can be a tremendous advertising advantage. Also, franchisees that are located near one another can advertise together, thus reducing costs.
   Advantage #4–Ongoing Advice, Research and Development
   Franchisees need assistance throughout the term of their business endeavors. The franchise system’s staff of experts can give this needed help in all aspects of the business. The franchisor is also in a position to provide on-going research and development. Thus, new products and services will be brought to the attention of the franchisee.
   Advantage #5–Business Synergy
   The word “synergy” refers to the idea that the sum of the whole is greater than the separate parts. This principle can be applied to franchising. Those who buy a franchise become part of a “family” where all members work together for the good of the whole. Indeed, there can be support and assistance in a franchise organization that assists everyone in becoming successful. Often, some of the most effective ideas come from franchisees who in turn share their ideas with the corporate office and with other franchisees.

   The Challenges
   Challenge #1–Working Within the System
   People who have difficulty following directions or who dislike working within a system may find franchising extremely frustrating. Conformity to the franchise system is critical if consistency among franchises is to be
   maintained. However, there are areas such as marketing where a franchisee can be creative.
   Challenge #2–The Risk
   While it is true that purchasing a franchise has less risk than starting an independent business, there still are risks. Because you own the business, you, to a great extent, determine the success of your venture. The franchisor may have a great program and a respected name, but in the final analysis much of the risk is in your hands.
   Challenge #3–Working With the Franchise System
   Buying a franchise can be closely compared to entering into a marriage. Both are legally binding relationships that can last for a long time. Your relationship with the franchise system and its staff will be extremely important. Get to know the franchise system through the following methods: a. Visit the corporate headquarters. Seek to get a feel for the staff and how smoothly the operation runs. b. Talk to other franchisees. Ask what their relationship with the franchisor is like. c. Read as much about the franchise as possible.
   Challenge #4–False Expectations
   Some people enter franchising expecting instant success. Perhaps the reason some expect this is the tremendous success achieved by some franchisees. However, this success did not come without hard work and great effort. Franchising, like any other business, requires tremendous time, initiative and industry. Obtain from the franchisor as realistic a picture as possible as to what is required in operating that particular franchise.
   Challenge #5–Managing the Business
   Some individuals are more prepared to manage a business than others. They have some business experience and have learned to get along well with people. Other individuals may find that managing a franchise is a tremendous burden. You must honestly assess your preparation to run a business. If you find that you have little or no experience, you may want to seek special assistance from the franchisor in business management.

   We hope this advice and list of pros/cons about the potential of franchising helps you reach your better understand your business situation and potential.
   There is plenty more content you may consider, however, before reaching a decision:

   Here’s an AllBusiness Video entitled, “How to Create a Franchise”

   Here’s some related AllBusiness articles:
   Franchising Your Bsiness:
   What Help Does a Franchisor Provide to Franchisees?

   Or, for everyting franchise-related, see our Franchising Center:

   Finally, these websites might be of some aid to you:
   Directories of Franchising Opportunities:

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