Tanner Montague came to town from Seattle having never owned his own music venue before. He’s a musician himself, so he has a pretty good sense of good music, but he also wandered into a crowded music scene filled with concert venues large and small.But the owner of Green Room thinks he found a void in the market. It’s lacking, he says, in places serving between 200 and 500 people, a sweet spot he thinks could be a draw for both some national acts not quite big enough yet for arena gigs and local acts looking for a launching pad.“I felt that size would do well in the city to offer more options,” he says. “My goal was to A, bring another option for national acts but then, B, have a great spot for local bands to start.”Right or wrong, something seems to be working, he says. He’s got a full calendar of concerts booked out several months. How did he, as a newcomer to the market in an industry filled with competition, get the attention of the local concertgoer?
1, Protect your name by having a legal adviser run a trademark search to determine the status of your name. If the search uncovers no conflicts, apply for registration with the U.S. Patent and Trademark Office.
2, Systemize your operations and put those standards and procedures in writing so your franchisees can use them to assist their operations.
3, Determine whether your vendors can service franchisees across the country. If yes, lock them into long-term contracts. If not, determine how your franchisees in other markets will be serviced.
4, Figure out how you intend to raise the money necessary to assist multiple franchise owners open their versions of your business in markets countrywide.
Franchising is not for everyone. It requires time, thoughtful decision-making, money and commitment to your franchisees. Assuming you are prepared to franchise your business, here are five keys to readying your business for franchising.
1. Protect your name.
Retain a trademark attorney to run a trademark search to determine if there are other users of your business’ name, and if there are, whether they have senior rights that will prevent you from expanding under that name. If the search uncovers no conflicts, apply for registration of your trademark with the United States Patent and Trademark Office. You can offer franchises before the trademark has achieved registration, but you should begin the process immediately because it can take 15 months or more to obtain the registration.
2. Start creating manuals for your business.
You need to systematize your operations, but you also need to put your standards and procedures in writing. The manual is the “coloring book” that you will provide to your franchisees to assist them in operating their businesses. Your franchisees should be successful as long as they “color within the lines,” but you need to draw the lines for them and hold them accountable to staying within those lines.
3. Solidify your relationships with vendors.
You likely have unique relationships with vendors, whether they are product vendors for retail stores, ingredient vendors for a food-related business or equipment vendors. Can these vendors service multiple franchisees in multiple markets? If not, think about how franchisees in other markets will obtain the benefits that you purport to offer them. If your vendors can handle this additional business, lock down your sources of supply with long-term contracts.
4. Raise money.
It takes less capital to help 50 people open 50 businesses than it does to open 50 businesses yourself. However, it still takes significant capital to train and assist 50 franchisees. It also takes time and money to structure your franchise offering and to sell franchises. Funding these initial costs from your current cash flow can be difficult and may put you in arrears with your suppliers and vendors.
5. Comply with franchise laws.
Federal law requires you to prepare and deliver to prospective franchisees an extensive disclosure document before they pay you any money or sign any agreements with you. Minnesota and a dozen other states have laws requiring you to register that document before offering franchises. If you even advertise the availability of franchises before complying with these laws, you may have trouble registering when you are ready to do so. If you fail to comply with these laws, your franchisees may also have rights against you if they decide they no longer want to be part of your franchise system. Thus, before taking the next step, consult with an attorney well versed in franchise law.
Franchising is not right for every business. And the road to success in franchising is filled with potholes. However, if you plan ahead, understand what you are embarking upon, and have knowledgeable people assisting you, you could be the next success story in franchising.
