Sunday, April 6, 2008

Franchising Your California or Arizona Business

Even in a rough economy franchise lawyers receive calls from small to mid size businesses that are doing well and are at the point where they really need to expand to continue or increase that success. There are even businesses, as strange as it may seem, that fold because the demand for their products or services exceeds their resources to meet that demand and they simply fall apart trying to meet that demand. We will revisit the topic of franchising from time to time on this blog.

Why Franchising is an Option for some Businesses:
  • Cost. Franchising is not cheap, but finding the equity or capital to expand a business without franchising can be more costly. Setting up a franchise system requires the input of professionals to meet legal requirements and properly plan the expansion of the business. Franchising allows some businesses to structure the expansion in a way that some of the costs of a regular business expansion are the responsibility of the franchisee. E.g. Lease or service contracts.
  • Management. If a business were to expand without franchising, it would be hard to do so without hiring additional staff to manage additional outlets. Good Franchisees essentially serve the same basic functions your ideal manager might serve in an expanded business. Because franchisees have a stake in your business, indeed, they own the unit that you sell them, with the training that you provide and the guidelines under which they operate, franchisees can spare a business the risk of finding managers who are not sufficiently motivated or finding good managers who may leave at any time they choose. It is not unusual to see franchise agreements that are 10 to 15 years.

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