As 2018 begins, it's time to start putting together your business plan and evaluate your goals for the year. Are you a business owner who has developed a proven model of success? Do you have a recognizable brand? Are you looking to grow your brand and expand? If the answers to these questions are "yes," you might be ready to take the next step to make your business a franchise. While not all businesses are cut out to become a franchise, here are some initial factors to consider in determining whether franchising is the right model for you.
Do you have a proven model of success?
In order to create a successful franchise system, you must first have an effective and proven business model that can be easily replicated -- think a "business-in-a-box" model. Franchisees want to step into a model that is attractive and can be successfully (and easily) duplicated. You will need to be able to teach your franchisees how to operate your business with the same degree of success. This means being able to provide franchisees with the products, services, procedures, policies and training necessary to help the franchisees create a successful business.
Is your brand protected?
Your brand needs to be protected and secure. At a minimum, this means you need to own and control your business and trade names by registering your trademark (your brand name) with the United States Patent and Trademark Office. You do not want to get into a situation where you cannot expand your geographical footprint because someone else owns the rights to your trade name.
Do you have sufficient capital?
While creating a franchise system is a means of expanding your business, there can be significant costs involved to create your system. You will need capital to prepare legal documents, such as the Uniform Franchise Disclosure Document and Franchise Agreement, and assist with other related legal work, such as protecting your trademark. You will need to have a CPA conduct an audit of your company's balance sheet. If you intend to expand your system in a state that requires registration, you will need to pay filing fees in order to register your system. You will also need additional funds to prepare an operations manual, training manual and marketing materials.
Are you ready?
Finally, you need to ask yourself whether you're ready to release control of your model and become a franchiser. While you're still a "business owner," your daily tasks will certainly change. Once your franchise system is created, you'll spend more time focusing on attracting, vetting and training franchisees and marketing the brand, rather than focusing on the ongoing daily operations you once had. Indeed, as a franchiser, you will need to release control of the franchisee's daily operations in order to avoid liability in the future.
With all of this in mind, where do you go from here? If you think franchising may be an option to grow your business, you should obtain legal advice from experienced franchise counsel. The Franchise and Distribution Team at Ice Miller LLP can help advise whether franchising is the right model for your business, help structure your franchise operation and help you navigate through various federal and state regulations.
• This column is written by Christina Laun Fugate, partner, and Alice A. Kelly, Of Counsel, of Ice Miller LLP. This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.