Anyone familiar with franchising knows how insanely profitable it can be. Whether they’re chicken franchises or otherwise, franchising has a proven track record of raking in profits, provided it is well-established and managed.
What’s A Franchising?
At a basic level, franchising is when a large company or conglomerate gives an individual or entity the right to use its brand name and trademark to do business. The large company is the franchisor, while the individual or entity being granted the license is the franchisee. For example, if Golden Chick gave you a right to use their trademark while running your restaurant, you’re their franchisee.
Recent data suggest that franchises account for more than half of the fast-food restaurants in the US, with many of them making huge profits. This trend continues as more eateries and restaurant owners consider getting a piece of this pie.
Undoubtedly, franchising has a lot of perks for both parties (franchisor and franchisee). However, it helps to assess your position to see if franchising is right. For example, the ability to scale your restaurant business is crucial in franchising. Whether or not your restaurant is already successful or experiencing steady growth is also a factor. Then there’s the small matter of startup costs. Franchising involves a significant upfront investment, usually in the thousands of dollars. That’s why it helps to inventory where you’re at and see if franchising is correct (and feasible) for you.
Once you’ve determined that you have what it takes to franchise your restaurant, it’s time to set it up. This involves several steps.
1)Preparing Your Franchise Disclosure Document (FDD)
Franchising your restaurant requires some paperwork. Crucial among such paperwork is the franchise disclosure document. Legally, you, as the franchisor, are required to disclose this document and its terms to anyone that wants to be a franchisee in your restaurant business. The FDD is the document that lays out all the details of the franchise deal; its terms like estimated startup costs, operational requirements, royalties, and every legal aspect of the relationship between a franchisor and franchisee. This document will serve as a blueprint that’ll be used to establish any future relationship with any new franchisee.
2) Preparing Your Franchise Operational Manual
Running a franchise restaurant involves a lot of work and attention to several details. The franchise operations manual is more like a handbook that guides how your franchisees run their restaurants while adhering to the required standards. For example, a franchisor expects franchisees to uphold specific standards when setting up their franchise restaurants. This includes restaurant location and space requirements, menus and recipe standards, acceptable suppliers and distributors, whether or not take-out is part of the delivery system and how it should be run, marketing, and numerous other things. Of course, the details and standards of a franchise operation manual can be modified over time, depending on market conditions and customer preferences.
3) Protecting Your Intellectual Property
Intellectual property is that which is valuable yet cannot be physically quantified, usually because it’s a result of human intellect. As a franchisor, your intellectual property is one of your most valuable yet intangible assets. Protecting it from misuse is of great importance to avoid exploitation. This is why you want to ensure that your franchisees are not in a position to misuse your trademark and brand name at will. Register your trademark with the necessary authorities after thoroughly reviewing them.
4) Creating A New Franchising Company
A franchise is a separate legal entity. Regardless of whether you’ve been running your restaurant or a chain of them, entering into a franchise agreement with another individual means the creation of another legal entity. This is crucial for issues of liability in case things go wrong. Also, you don’t want the franchise deal to infringe on your existing restaurant business. Remember that your financial disclosure document requires you to disclose your income statement to franchisees. Creating a new franchise company ensures that your franchise deals (as a new corporate entity) are kept separate from your restaurant operations.
5) Registration Of Your Financial Disclosure Document (FDD)
Your law or legal team will be responsible for drawing up and ironing out the details of the financial disclosure document, ensuring that it is in line with state and federal regulations while giving you a competitive edge in the market. Once this is done, it’s time to issue your FDD. Some jurisdictions require registration with the relevant authorities before doing this. In such places, ensure you complete the registration before issuing the FDD. Your lawyers will oversee this process, ensuring that your FDD is in compliance with franchise laws and putting an issuance date on the FDD. As soon as the FDD is issued, you can start offering franchising deals to individuals or entities.
6) Developing A Sales Strategy
Regardless of how successful you’ve been at running a restaurant, franchising is different. While similar marketing elements may apply, you’ll need a clear franchise sales strategy. Winging it will most likely lead to unsatisfactory results. As such, creating a solid and workable franchise sales strategy during the initial development process is crucial. Start by creating a franchise landing page. This should include a solid value proposition detailing your values and your vision. It should detail what future franchisees can expect to gain if they enter into a franchising deal with you. It helps if your brand has a proven track record of solid returns and good management. This will be a major selling point. This also helps bring in organic leads—people who find your business through search engines rather than directly visiting your website.
7) Developing A Franchise Plan And Budget
Experts will tell you that it takes about five years to reap dividends for franchisees. This means that your plan should factor in this timeframe. During the first year, focus on “seasoning” your brand. This means bringing in a few qualified franchisees. Organic leads will be most beneficial. During the second year, focus on helping franchisees establish themselves by providing training and boosting their marketing efforts. Keep doing this even as you consider bringing more franchisees on board. If you’ve done an excellent job with your initial franchisees, they’ll validate your brand and become powerful tools to attract more franchisees.
Ultimately, it would be best to have a proper plan before diving into franchising. At Golden Chick, we can help you navigate all the sticky issues in franchising a restaurant.
Contact Golden Chick today!
250 E Arapaho Rd #250 Richardson TX 75081,
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