Franchising in India -Sparkleminds

Frnchising in India-Sparkleminds

Franchising your business is the process of expanding your business as part of a franchise model. In a franchised business, the business owner (the franchisor) grants their franchisees permission to use their established brand, and work under it to run their branch of the business. Franchisees will then pay the franchisor to use their brand and run their franchise unit largely independently. 

Franchisors offer support, branding, marketing, and operations guidance to franchisees, who then oversee the day-to-day running of the business.

Franchising can be an incredibly profitable form of growth, as it doesn’t require the same level of capital as company-owned expansion, and so can be a much quicker process

How to Find  Franchise Your Business

When evaluating the cost to franchise your business, it’s important to understand that, generally, there are two stages to the franchise development process:

Stage 1 – The Franchise Development Stage is the franchise development stage where you take the legal and business steps necessary to call yourself a franchisor and start selling franchises. 

During the franchise development stage, major milestones include developing and issuing your FDD, preparing your operations manual, and competitively benchmarking your franchise offering relative to your competitors.

Stage 2 – The Franchise Sales Stage is the initial franchise sales process over the next 12 months following the issuance of your FDD. 

During the initial franchise sales stage, you’ll be taking steps to sell franchises through different marketing channels including organic attraction, paid advertising, social media marketing, public relations, and franchise brokers.

What you’ll learn is that the franchise development process is an ever-evolving process that takes place over years as you continuously grow and improve your franchise system.

The Franchisee is also the one who executes leases for equipment, autos, and the physical location, and has the liability for what happens within the unit itself, so you're largely out from under any liability for employee litigation, consumer litigation, or accidents that occur in your franchise.

By its very nature, franchising also reduces the risk for the franchisor. Unless you choose to structure it differently (and few do), the franchisee has all the responsibility for the investment in the franchise operation, paying for any build-out, purchasing any inventory, hiring any employees, and taking responsibility for any working capital needed to establish the business.

Cost to Franchise Your Business

When we talk about the cost to franchise your business, right now we’re talking about the franchise development process (Stage 1) and this includes: 

(a) competitively positioning your franchise offerings and the underlying rights and obligations between you and your franchisees, (b) preparing your FDD and the entire legal infrastructure needed to become a franchisor and start selling franchises legally and the right way, and (c) the development of your operations manual. 

To get this done and, depending on whom you work with and if you prepare your operations manual, we’ve seen the cost range from $18,500 to $84,500.

Steps to Franchise Your Business

The following are the steps to franchise your business:

1. Determine if Franchising is Right for Your Business

Your business, business systems, and personal goals need to align with franchising. When you franchise you’ll be responsible for recruiting, training, and supporting franchisees as your brand grows.

2. Franchise Disclosure Document

Your FDD should be prepared to comply with federal and state-specific franchise laws and should be specific to your business and the franchise that you are offering.

3. Operations Manual

You will be providing a confidential operations manual to your franchisees. Your operations manual must document and inform you franchisees about all system requirements and information needed to develop, open, and operate the franchised business.

4. Register Your Trademarks

You must register your trademarks with the United States Patent and Trademark Office. More about trademarks here and what could happen if your trademarks are not registered.

5. Establish Your Franchise Company

You will need to establish a new franchise entity, typically a corporation or limited liability company. Your new franchise company will be in the business of selling franchises, supporting franchisees, and building systems to grow.

6. Register and File Your FDD

Before you can sell franchises in franchise registration states franchise filing states. You must file the appropriate applications and notices. Check out our interactive franchise registration map to learn more about state-specific laws, registration, and filing requirements.

7. Create Your Franchise Sales Strategy and Set a Budget

Even after your legal documents are complete, determining your initial franchise sales strategy and setting a budget is critical. Evaluate your target franchisees, target markets, interest in your franchise, and a realistic budget for attracting, training, and supporting franchisees.

The franchise development process typically takes between 90- to 120-days to go from where you are today to being a franchisor legally able to offer and sell franchises. However, once you “franchise your business” you’re just getting started.

Why Franchise Your Business

Franchising, as an alternative form of capital acquisition, offers some advantages. The primary reason most entrepreneurs turn to the franchise is that it allows them to expand without the risk of debt or the cost of equity. 

First, since the franchisee provides all the capital required to open and operate a unit, it allows companies to grow using the resources of others. By using other people’s money, the franchisor can grow largely unfettered by debt.

Moreover, since the franchisee -- not the franchisor -- signs the lease and commits to various contracts, franchising allows for expansion with virtually no contingent liability, thus greatly reducing the risk to the franchisor. This means that as a franchisor, not only do you need far less capital with which to expand but your risk is largely limited to the capital you invest in developing your franchise company -- an amount that is often less than the cost of opening one additional company-owned location.

Moreover, your attorney and other advisors will likely suggest you create a new legal entity to act as the franchisor.

This will further limit your exposure. And since the cost of becoming a franchisor is often less than the cost of opening one more location (or entering one more market), your startup risk is greatly reduced.

Franchise Consultants Mantra:

Starting a business, becoming a consultant could be a good option for you, depending on your experience level.

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