How to Set Up a Franchise Company

Updated March 23, 2017

Franchising is a business model that offers companies the ability to expand by offering their business model, proprietary products, business methods, and company branding through licensing arrangements and revenue-sharing deals. Franchising can be offered in a variety of fields such as restaurants, cleaning services, and tax preparation. Setting up a franchise company requires creating a plug-and-play business model that others can replicate, establishing the legal framework for licensing, and modifying the existing business to support franchise owners.

Standardise your business products and services. Replication of your business at other locations is simpler when you follow the same business model. Look to replicate equipment, logos, business documents, suppliers, and technology systems. The more you streamline your existing business, the easier it will be to support franchise owners and increase success possibilities.

Work with legal advisers to create licensing agreements and revenue-share models. Determine what types of franchise models you will offer, such as single-unit franchises, or multi-unit franchises, the financial obligations of a franchisee, and what services you will contractually be obligated to supply as the franchiser. Be sure to include trademark restrictions and marketing arrangements in your documentation.

Establish a training program and operations manual. The operations manual should provide a new franchise owner a comprehensive guide for operating his franchise from initial set-up requirements to day-to-day management duties. This guide should also be used as the foundation of a training program. Comprehensive training allows new franchisees to be more prepared to manage the business. It also affords them the ability to learn your company's methods for success and can lower the long-term support requirements from your business. Additionally, a well-crafted training program can be a key marketing element when recruiting new franchise owners.

Modify your existing business to include marketing and support staff for franchisees. You can opt for an external marketing staff to answer potential franchisee questions and provide recruiting functions, or you can rely on an in-house staff. Additional employees should be given support requirements such as franchisee problem resolution, training requirements, and general support activities. These employees should also provide supervisory functions over franchisees to ensure compliance with contractual obligations and ensure that they uphold your quality and brand standards.

Market your franchise offer. Create a section on your website that provides details on your franchise and contact methods to obtain further information. Try to have your franchise listed in the Small Business Administration's franchise registry, as many potential franchise owners will look to the SBA for guidance and potential financing assistance. Additional marketing opportunities include online marketing efforts, franchising trade shows, and direct sales methods.


Include franchise termination procedures in your legal documentation for franchises that do not comply with their obligations.

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