For many businesses, franchising is an effective way to expand. But it isn’t the only way.
Many businesses open their own additional stores (like department and grocery store chains). Some expand by hiring additional salespeople and sales agencies (think of insurance companies and the proverbial Fuller Brush salesperson). Some expand distribution to new regions via mail order catalogues, or the internet.
These are all good choices. So why franchise?
Reasons to Start a Franchise
There are many reasons. Typically, the main goal is to expand, while limiting risk. Franchising allows a business to expand the reach of its name and its services or products, with capital to start locations coming from franchises. Franchisees lease their physical space. They hire their employees. They buy their inventory. They can earn a profit from operating successfully, while bearing the risk of loss.
Successful franchisors enjoy a revenue stream from franchise fees and royalties, without having to invest the substantial sums to establish more company-owned stores.
Here are some additional reasons that make franchising attractive to many businesses:
- The franchisor sets many of the terms in which franchisees operate.
- Franchisees tend to be motivated to work hard because they invest their own capital.
- Franchisees assume many of the risks in:
a. Leasing or buying property;
b. Hiring, training and firing employees;c. Committing to supplier contracts;
d. Obtaining and repairing equipment; and
e. Securing financing
As a franchisor, you’ll undertake new challenges too. You’ll need to analyze operations to determine what works and why, including aspects pertaining to:
- Demand for your services and merchandise
- Supply Chain
- Employee Recruiting and Training
Launching Your Franchise System
Getting started has some legal implications. Franchises are regulated by state, federal and international governments. Lewitt Hackman’s lawyers are experienced in dealing with the rules and regulations.
Our franchise attorneys create the required FDD, or Franchise Disclosure Documents; advise you on legal procedures for selling franchises; protect your intellectual property and trade secrets; and draw up the Franchise Agreements.
If needed, we can also help form your limited liability company or corporation, establish non-competition agreements, and review other contracts for real estate, vendors and human resources. For companies that have long established franchises, we help with franchise renewals and terminations, and resolving disputes.