Q:

How is a franchise formed?

A:

Quick Answer

Forming a franchise involves developing a business system, creating an operations manual, drafting a franchise agreement and making a marketing plan. The goals are to make the new location independent and to train the franchisee to run it on his own. Creating a franchise takes time, money and legal support.

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How is a franchise formed?
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Full Answer

The first step in forming a franchise is to have a successful and formalized business system that serves as protocol for franchises. A good business system includes standards, mission statements, employee training procedures, dress codes and everything else that goes into the day-to-day running of the business.

The owner takes the information that constitutes the business system and creates an operations manual. The operations manual is a written collection of the rules, policies and protocol needed to run the business successfully. It is the blueprint upon which the franchisee relies. The operations manual is as detailed as possible, covering every conceivable facet of the business.

With legal assistance, the franchiser creates a franchise agreement between himself and the franchisee. The franchise agreement contains stipulations regarding startup fees and royalties. It includes an agreement by the franchisee to abide by the mission statement and corporate protocol.

Once the franchise opens, the franchiser sends a qualified support team to provide the new location with assistance for one to three weeks so that it implements protocol successfully from the get-go.

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