What Is the Lifecycle of a Franchise System?

A reasonable concern for many business owners exploring the operation of a franchise system is how long it will take to see a return on the invested time, money and other resources. In other words, what is the lifecycle of a franchise system?

A franchise system is not a method employed for instantaneous results. Business owners should know the process requires patience and extended commitments in the hope of a substantial payout down the road. The expectation is probably not much different from the one you had when first deciding to start a business. Now an individual success, establishing a franchise is the next frontier for your business.

The Initial Planning Stage

The key to a successful franchise system can be found in the work and thought placed into the first stage of planning. During this time, you should be working with advisors to prepare necessary documents and consider strategies for beginning the franchise. Important concepts from this initial stage include:

Onboarding the First Generation of Franchisees

The next step in the lifecycle is finding and onboarding that first batch of franchisees. Have a careful screening process to evaluate candidates and find franchisees that will become trusted members of the community. You will benefit from their positive experience through a growing customer base and referrals for future franchisees. Consider the following for the first unit of franchisees:

  • Geographic market (i.e., select places where your franchise will likely succeed because of the location’s demographics and competition)
  • Experience (how much do your potential franchisees know about business, in particular operating as a franchisee?)

Refining the Franchise Culture

Each new franchise system will develop issues along the way that you must address through updates to operation guidelines and the overall messaging as the franchisor. Locking into the strengths of the franchise system and getting franchisees on the same page will be essential for continued growth. Part of this process may require filling out a management team and installing other programs for the success of employees and franchisees.

Exponential Growth in Franchisees

As you continue to develop training programs and establish key personnel, the number of franchisee units will hopefully climb at an exponential rate. Of course, some franchisees may close, but others will take their place. Protecting the profitability of each unit will be critical for sustainable growth.

Determining an Exit Strategy

The last stage in a franchise system is the chosen destination of your journey and an opportunity to realize the massive reward for years of dedication. The exit strategy can be difficult to navigate because so much effort went into building the franchise. However, several buyout strategies exist that allow franchisors to choose how much or little future involvement they will have with the franchise.

Legal Representation for All Stages of Your Franchise

Understanding the lifecycle stages of a franchise system can help prepare owners for the time commitments and other expectations of starting this next chapter in a business. The attorneys at Franchise & Business Law Group regularly advise clients through the challenges and legal issues in each of these franchise stages. Contact us if you have any questions about starting, operating, growing, or selling a franchise system.

Contact Franchise & Business Law Group today to schedule a consultation about expanding your business through a franchise or license.