Franchising a Business

November 6, 2017
Ashley Shaw

It’s a good time to be a small business owner in Utah. According to a recent survey, Utah was found to be the seventh most-friendly state toward small business owners in the country, and with the economic growth that the state has been experiencing, that ranking is likely to rise.How can small business owners take advantage of this opportunity for growth? One increasingly popular option is franchising—selling the right to use the company’s brand and business model to a franchisee who owns a separate establishment.Before beginning the franchising process, small business owners will want to take a good, hard look at their current position and finances. Franchising may be less expensive than other growth options, but it still requires time and money. It also creates significant changes in the structure and needs of companies, even those that already operate in several locations.

Consider the following questions as you prepare to open a new franchise:

Does it make sense financially? Is the demand large enough to justify opening a franchise? Where would a new franchise bring the most profit and growth opportunity? Careful market research and analysis is often the difference between a mediocre franchise and a lucrative one.

Who will run the new franchise location? Finding a new franchise owner can be difficult, especially for the first time. Business owners must be able to trust franchisees with their brand; just because someone owns enough capital to buy a franchise, doesn’t mean that they’ll be a good fit for you and your company. Look for a franchisee that has financial resources, business capabilities, and a willingness to work with you to achieve your vision for the company.

What are the legal requirements for opening a franchise in your area? No matter where you are located in the country, the Federal Trade Commission (FTC) will require you to register a franchise disclosure document (FDD). On top of that, your state may have other standards that you may be required to meet. While the legal hurdles may appear daunting, hiring a legal professional can help make the process run smoothly and quickly, leaving you free to focus on your company’s needs.

What are the business terms of your franchise agreement? This is not a question to skim over quickly. The franchise fee, contract length, and royalty percentage might seem like relatively minor details in the process of franchising, but they matter greatly in the long run. Once again, for business owners less familiar with the franchising process, hiring a lawyer is a smart investment to maximize profits later on. For many business owners, franchising is a smart way to increase profit, expand into new markets, and reach more customers.

If you’re a small business owner in Utah and are considering franchising your company, legal professionals at Sumsion Business Law can help you reach those goals without the hassle.

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