Canadian Lawyers. Trade-mark Agents. Franchise & Commercial Law. Litigation. Toronto-Ontario-Canada

FRANCHISING YOUR BUSINESS

Your business is successful. You may have one or several locations and you now believe that you are ready to expand your business. Franchising appears to be a popular form of business development, but how does one begin to consider the possibility of franchising? In this section, we examine what you need to consider and to implement when structuring a franchise system.

Checklist # 1
Considerations When Franchising a Business

Checklist # 2
Components for Successful Franchising
Prospective Franchisors

CHECKLIST # 1 - CONSIDERATIONS WHEN FRANCHISING A BUSINESS

Businesses often turn to franchising as a means to generate capital. There are, however, a myriad of issues that prospective businesses should first consider before they adopt the franchising model. Among the issues that a prospective franchisor should address before deciding on implementing a franchise program are the following:

Prototype. How successful is the principal (i.e., prototype) location(s)? A prospective franchisor should be operating at least one profitable operation before franchising its business.

Replication. Can the prospective franchisor readily replicate the business so that others (i.e., franchisees) can benefit from the experience and advice of the existing company?

Rate of Return. Can the prospective franchisees generate a reasonable rate of return on its investment after paying the franchisor any royalty and advertising contribution payments payable to the franchisor?

Operations Manuals and Other Documentation. Has the prospective franchisor developed detailed operations manuals for its operations and training courses and materials so that potential franchisees can easily learn the system and be trained when entering into the system?

Sufficient Demand. Is there sufficient demand for the product or service that would justify expansion by way of franchising?

Advertising and Marketing Advantages. Is the franchising model capable of offering marketing and advertising advantages to prospective franchisees? Can the prospective franchise system take advantage of the synergies associated with mass advertising campaigns?

Trade-Marks. Does the prospective franchisor have a trade-mark and other unique characteristics that differentiate itself from its competitors? Is the franchise sufficiently unique to attract potential franchisees to the system?

Adequate Resources. Does the prospective franchisor have the necessary resources and the drive and commitment to develop and manage the franchise system in addition to running the day-to-day operations of the core business?

Financial. Has the prospective franchisor examined the costs associated with implementing the franchise conversion strategy, the cost to open each franchised unit, and the ongoing costs related to the support and maintenance of the franchise system?

A prospective franchisor is strongly encouraged to consult with competent franchise lawyers before seriously engaging in any efforts to launch a franchised business. Please feel free to call Joseph Adler to arrange for a free initial consultation.

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CHECKLIST # 2 - COMPONENTS FOR SUCCESSFUL FRANCHISING

To succeed as a franchisor, your system should exhibit and incorporate some or all of the following components:

A tested business concept with some reasonable assurance that it could be replicated.
Training ñ the ability of the prospective franchisor to convey the system in a meaningful manner.
Site selection skills.
Research and development opportunities.
Enforceable franchise documentation.
Disclosure document preparation, maintenance and compliance.
Co-branding possibilities.
Financing opportunities for the franchisor itself and arranging financing with financiers.
Sourcing of supplies, imposing sourcing restrictions and obtaining better pricing through economies of scale.
Field service expertise.
Franchisee recruitment programs.
Advertising and promotion.
Customer information mining (e.g., mystery shopper programs).
Internet presence and extranets.
Effective communication with franchisees.
Dispute resolution techniques.

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