What Is The Cost To Franchise Your Business?
What is the cost to “franchise your business”. This is a question that comes up often and one where you are bound to find a wide (really wide) range of estimates and opinions. This “cost” issue was recently discussed in Julie Bennett’s excellent Franchise Times Article‚ “Anecdotes Tell Peril of Starting a Brand‚ Yet Statistics Don’t Exist”.
The article addresses a number of issues that potential start-up franchisors should consider. However‚ two of the issues that I would like to emphasize relate to:
- What Franchise Services Do You Require to Franchise Your Business; and
- What should the Cost be.
In the Article‚ Julie Bennett does a great job of evaluating the experiences of a start-up franchisor who‚ it appears‚ entered the world of franchising at an accellerated pace. That is‚ the start-up franchisor of a child fitness concept‚ hired a large franchise development company (I believe the company was Francorp) and purchased and allegedly paid $86‚400 for a franchising package. The start-up franchisor explains that when she visited with the franchise developer they picked her up in a limo and then proceeded to take her “through everything‚ from concept review through site analysis…” Ultimately this start-up franchisor mentions that she was dissatidsfied with the franchisor developer’s services and‚ ultimately‚ she utilized a different company to redraft her FDD – – at an additional expense‚ of course. Certainly‚ I am not aware of this start-up franchisors particular experience‚ nor do I have a basis to comment as to the franchise developer‚ however‚ I have alot to say about the “franchising process” and the “cost”.
Here are my thoughts:
- Franchising Is A “Process” That Takes Time – When it comes to franchising your business‚ time is required. So‚ when you begin the franchise development process dont waste time and money focused on “sales” (something that will or‚ at least should later occur through an organic process) but‚ rather‚ focus on creating a franchise system (FDD‚ Franchise Agreement‚ Operations Manual‚ etc…) that clearly identifies‚ reflects and refines what your franchise system is all about.
- You Know Your Business and If You Dont – Forget Franchising – Many franchise development companies sell a complete package that includes “market studies”. Well‚ I have some news for you‚ if you dont know your market – including the potential for expansion and the potential for assisting franchisees achieve this expansion – then you have no business franchising. Or‚ at least‚ you are not ready. But‚ certainly‚ you dont need to be paying a third party to learn your business.
- The Right Franchise System Needs To Develop Naturally During the Franchising Process – I am a firm believer in this and as many of my clients will tell you‚ things change and mature over time. Our typical franchise development process takes 6 months. During this 6 month “process” we discuss everything and work todard developing a comprehensive franchise system. However‚ the system components that we focus on changes over time and‚ I can tell you‚ that when we complete the development process the franchise system that we ultimately deliver may look very different from what we initially expected or planned. The point is that the franchise development process is just that‚ a process‚ and not some generic cookie-cutter formula.
- A Comprehensive Program – The franchise development program that we offer is comprehensive. It is designed to take you from successful business owner to successful franchisor. Our services involves‚ trademark analysis‚ trademark protection and registration‚ operations manual assistance‚ multi-state FDD development‚ and complete development of franchise and operational agreements. Also‚ to ensure that start-off on the right track and “stay on that track” our program includes post-launch assistance. Typically the cost for an FDD will costs $18,500 – 25,000 depending on the business and issues specific your franchise system.
By the way‚ so in addition to being a franchise lawyer‚ I am also the managing member of a national franchise company (a home maid cleaning franchise) and I can tell you that when it comes to franchising there is a lot to get done. Don’t rush the development process and don’t sign up for services that you may not need.
By Charles Internicola April 12, 2013
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