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Franchising Your Business: 5 Steps to Turning a Mom and Pop Business Into a Franchise

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Famed fried-chicken chain KFC currently has franchisees in more than 100 countries and territories around the world, but back in 1930, it started out of the front room of a local gas station where founder Harland Sanders singlehandedly worked as the station operator, chief cook, and cashier.

Today, Pizza Hut has a name so big it speaks volumes. But in 1958, founders Frank and Dan Carney came up with the name because their first location was in a building whose signage was too small to accommodate anything longer than nine letters.

In 2000, Ugo and Cristiana Ginatta opened their first Paciugo Gelato & Caffè location in Dallas after arriving from Italy with dreams of introducing handmade and healthful gelato to U.S. consumers. Since then, they’ve opened the opportunity up to franchisees and have grown to more than 40 locations in the United States and Mexico.

Each of these brands has successfully made the transition from mom and pop shop to streamlined franchise operation, but how exactly does one make such a big jump? There are five key steps that any potential franchisor must follow.

How to franchise your business

1. Get experience running your own business before you start selling the opportunity to others

After determining that there was ample opportunity in the U.S. market, the Ginattas decided to franchise their gelateria concept in 2004. Before doing so, they first tested several models for the stores by opening their own locations, which each had very distinct demographics, trade areas and business hours. They also perfected the store design of various-sized spaces ranging from 600 square feet to 2,500 square feet, and even used different types of materials in order to study how the stores would stand up to heavy usage and foot traffic over time.

“Make sure you have thought of everything,” says Ugo “and that you have sufficient experience in operating the concept on your own.”

2. Build solid, repeatable systems

Before even making the franchise opportunity available to others, the Ginattas spent five years developing their training materials, systems and procedures in order to ensure that the product would be of the right quality.

“It is important to build systems that allow someone else to run the business,” says Christian Faulconer, CEO of Franchise Foundry. “These do not need to be computer-based systems. In some cases, repeatability can be created by simply identifying the business process and creating a checklist of tasks that need to be completed. Repeatability is key.”

3. Know—and be prepared for—the differences between being a business owner and a franchisor

The fact that you can run your own business flawlessly does not necessarily mean that you’re ready to run a franchise. For example, selling your $50 product or service requires a very different kind of skill set than marketing and selling a $300,000 franchise opportunity, says Faulconer. In addition, bringing franchisees on board is very different from hiring employees. Understanding the difference was an important lesson for the Ginattas to learn.

“Every company has standards and procedures that employees are expected to contribute to and then follow and respect,” explains Ugo. “Employees are held accountable for those standards and procedures and they are coached and developed with ongoing training and performance reviews. Franchisees, [on the other hand], have to be very much involved and convinced of the standards and procedures set by the franchisor. They want to know the reasons behind certain choices and the effect on their return on investment and margins. They need to be ‘won over’ to be receptive to adapting.”

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4. Protect yourself legally

Once you decide to franchise your business, you’ll need to abide by a standard set of rules and procedures established by the Federal Trade Commission. The Ginattas worked with specialized law firms from the beginning to get all of their paperwork in order; however, this is a step that some new franchisors tend to skip.

“Business owners looking to franchise often make the mistake of starting without building the proper legal foundation,” says Faulconer. “Entrepreneurs tend to be decisive and move quickly. If they decide to sell a franchise without getting good legal help, they are likely to get themselves into trouble.”

5. Understand the financial requirements of franchising your business

When the Ginattas made the decision to franchise their business, they weren’t only making a huge business decision, they were also making a significant investment decision. Prior to even launching the franchise, they had to invest in a corporate structure in order to be able to support the franchisees. They then hired personnel to be in charge of franchise sales as well as to monitor the company’s growth. They invested in a manufacturing facility and warehouse to make handcrafted, fresh gelato. Finally, they found consultants specializing in marketing, IT, point-of-sales, and real estate.

Before making the decision to go big with your small business, look into the capital that is required. “Entrepreneurs frequently underestimate how capital-intensive it is to build a franchise system,” says Faulconer. “They tend to believe that the franchise fees will be sufficient to grow the business, but that is rarely the case. Be sure you have enough capital to see you through several months without a franchise sale.”

Franchise your business and become a household name

By understanding these five factors, you’ll have a much better chance of successfully growing your mom and pop business into a household name in franchising.

RELATED: 8 Reasons Not to Franchise Your Business

About the Author:

Sara Wilson is a freelance writer who specializes in issues related to small businesses. Contact her at wilson.sara@gmail.com.

Profile: Sara Wilson

Sara Wilson