Turn Your Business Into A Franchise – Let Us Help
Have you ever thought about turning your business into a franchise? One way to scale up a service business is to franchise. When you franchise your business, you can maximize the value of all the intellectual property you have created (and continue to create) – the IP that makes your business better than your competitors.
In a franchise, the business owner (franchisor) licenses their valuable, proprietary intellectual property to a third party (franchisee) in exchange for a fee, usually in a limited territory. Mcdonald’s, Anytime Fitness, Dunkin’, Snap-On, Kumon Math and Reading Centers, Ace Hardware – all are franchises. The franchisee buys the right to operate an independently owned branch of the franchisor business, with everything that entails. Your franchisee pays you, the franchisor, for the right to use all the trademarks, policies and procedures, processes, recipes, marketing collateral, designs, business plans, marketing plans, pricing structures and product offerings, training manuals, and the like – all the intellectual property you have created that makes your business work.
Franchise fees usually have at least two parts – an up-front buy-in fee and recurring royalties (percentage of the location’s revenue) payable by month, quarter, or year. Franchise buy-in fees typically range from around $20,000 to over $1 million per location, with royalties ranging from around 4% of revenue to 12% of revenue.
People buy franchises because they offer a tried-and-true business opportunity, a short-cut to a successful business of their own. Franchisors invest the years, the blood, sweat, and tears figuring out what works and what doesn’t work. They invest their time, dreams, ideas, people, and money to create and protect their intellectual property and build value (goodwill) in their portfolio of registered trademarks.
Franchisees buy the advantage of the franchisor’s time, investment, and expertise. Franchisees still put in the effort and money to launch and run their location, but the other stuff has already been worked out. By buying a franchise, they get a business that’s already figured out, with all of the intellectual property already protected and actively enforced by someone else. All they need to do is run the location. They get the benefit of the use of the trademarks that bring with them a loyal customer base, who buys with confidence because they know what to expect from the brand. They get the benefit of the trademarks without needing to invest any of the resources to create, clear, and register them. And they get the benefit of certain national or regional activities by the franchisor, such as national or regional advertising, negotiating special deals from suppliers, and new product ideation, testing, and launching.
By turning their business into a franchise, an entrepreneur can duplicate the success of their winning business model without needing to own and manage dozens of locations. Instead, franchisors own the intellectual property that makes the business work and licenses it to dozens of franchisees for a fee – usually an up-front buy-in fee and then recurring royalties payable by month, quarter, or year.
To learn more about how to turn your business into a franchise, contact us today.