Franchise Your Company
Many business owners have a successful business with 1 or more locations and are interested in knowing how to franchise their business….So here are the basics to franchise a company:
1–First you need a Franchise Disclosure Document (FDD)-which is an extensive set of required and customized disclosures describing the Franchisor, its officers, its concept, fees and obligations on both sides. It is a very extensive document of required state and federal disclosures about the company and the franchise concept, costs and obligations, plus all the contracts, including the franchise agreement. (approximately 150 pages+).
2—You will need a specific training schedule for new franchisees and an Operations Manual to teach the new franchisees everything from how to pick a location to preferable lease terms, to tenant improvement constructions, to inside décor and layout, and furniture fixtures and equipment and signage, hiring employees, basic operations, marketing and advertising, etc (everything you are doing now for your business, and everything you have learned)…… (We need the Table of Contents page of the Ops Manual only for inclusion in the FDD);
3–You will need professional financial statements of the franchisor company for inclusion in the FDD (1st year franchising in CA doesn’t need to be audited financial statements but needs to be prepared “reviewed” by an independent CPA according to generally accepted accounting principles.);
4-Once the FDD is complete, there is the additional step of applying to sell franchises in California- California State Registration. The state usually takes about 30 days to reply with usually some minor comments/changes. Once approved you can use the FDD in many other states, that do not require the extra step of franchise registration. And you can register in the other states that do require registration with your same FDD. See the lists all the registration states.
5-You’ll want to apply for a trademark with the United States Patent and Trademark Office on your trade name and/or logo if not trademarked already; this is part of what you will be licensing-your name and system. You can still franchise even if your trademark is not yet granted.
6-You may want new corporation or LLC for the Franchisor, if not using your existing entity. It might be easier and cleaner to form a separate entity just for the franchising arm but not required-just keeps the liability protection separate from your existing businesses.
As a Franchise attorney for 30 years, I have put together many dozens of FDDs and understand the requirements and efficiencies in creating an FDD; I also form the legal entities, and prepare the trademark applications and generally give a set fee. Find out how you can become a franchisor in less than 3 months and start franchising your brand across the states, and internationally.