How to Develop a Franchise Channel

A franchise is an agreement between the franchiser and a franchisee that gives the franchisee the right to purchase and sell the franchiser's trademarked products or services. The franchiser can also provide ongoing support and training to the franchisee for a specified length of time. In return, the franchisee typically pays a monthly royalty on gross sales in addition to a fixed sum for the privilege of running the franchise. You need to take a number of steps to develop a franchise channel.

• 1

  Determine whether it is appropriate for your business to develop a franchise channel.

  Analyze whether your product or service fills a unique customer need across different geographies. Look at your profitability over the past three years and determine if you can project consistent profitability with your business model for the next five years.

• 2

  Create and document the systems and procedures for replicating your business model in a different geographic location. Review and evaluate the documentation to determine the viability of creating a franchise.

• 3

  Develop a franchise business plan and have it reviewed by franchising and financial experts. Register your trademark and retain a franchise attorney.

• 4

  Draft a franchise agreement with the help of the franchise attorney. Specify payment terms, geographic constraints, performance expectations, inventory purchase constraints and terms for franchiser involvement with the franchise.

• 5

  Create a training program for franchisees and a franchise marketing program. Set up a franchise marketing team that is tasked with soliciting and training new franchisees. Provide new franchisees with training and ongoing support once they are on board.