You have been operating a successful business for some time now and are starting to think about the best way to continue to grow your business. You have evaluated the options and have decided that the best method for your business is franchising it. But how do you actually go about franchising your business?
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Franchise Disclosure Document
Federal law requires those who sell franchises to create and maintain a Franchise Disclosure Document or FDD. The FDD requires certain information be disclosed in twenty-three prescribed items that covers such information as the business experience of the key personnel in the franchise to the total initial investment needed to open and operate a franchise. It is also important to make sure you are in compliance with any state laws that govern franchises. Currently, there are fourteen states that require a franchise be registered and one that requires the FDD be on file with the state before it can be offered for sale so it is important to consult state law as well.
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Franchise Agreement
The franchise agreement is the contract that outlines the various terms and conditions of the agreement such as the obligations of both the franchisor and the franchisee, the on-going fees to be paid to the franchisor, and the support the franchisor will provide to the franchisee. You should also be sure to consult any state franchise laws as some states do not allow certain provisions be contained in a franchise agreement. The franchise agreement should be executed by both you and the franchisee but, under federal law, it cannot be executed before 14 days have passed since providing the franchisee with the FDD.
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Operations Manual
All successful businesses need an operations manual. The operations manual should outline the systems, policies and procedures of the franchise and provide franchisees with everything he or she will need to know in order to operate the business. Although all of these documents require a lot of time and effort to create, the operations manual often proves to be the most difficult. This is because the systems are always evolving, especially as your business continues to grow, and so it can be very challenging to put into words all of the various aspects of the business in an easy to follow guide for franchisees. A good place to begin is to sit down and write out everything you know about your business, how it operates and what you envision the franchise system would be like.
Creating these documents may seem like an impossible task, but if you take the process one step at a time, and consult an experienced franchise attorney, the task does not have to be so overwhelming. And once they are completed, you are on your way to achieving your dream of franchising your business.
