5 Things to Consider Before Franchising Your Business

So you’ve decided to franchise your business. Maybe you even have someone interested in buying a franchise. How do you go about actually doing it though? First, you’ll need a franchise disclosure document and a contract for the franchisee. There are complex rules regarding franchise disclosure documents, including state-specific laws. Because of the complexity, we recommend having a lawyer assist in drafting the disclosure document and contract. To save you time and attorney’s fees, here are 5 things to consider for your disclosure document.

1. Decide how much revenue you’d like from your franchisee including the upfront fee and then royalties each month.
2. Hire a CPA. Financial documents are required as part of the disclosure document and may help you decide how much revenue is reasonable to expect from your franchisee.
3. Determine who the directors or managers are. You’ll need a variety of information from them including their experience for the last five years, whether they’ve gone through bankruptcy, and whether they have certain types of litigation pending.
4. Make a list of any goods or supplies that you’d like the franchisee to buy directly from you or that they’ll need in order to open. Also make a note of any required suppliers such as if you have an exclusive contract with a company, like a soft drink supplier.
5. Consider whether you’ll offer franchisees financing through your company. Collecting interest can be a great way to get extra revenue if you are able to do the financing yourself.

There will be much more information your attorney will need for the disclosure document, especially depending on the state. But by lining up these five things, you’ll be well on your way to completing a disclosure document and franchising your business.

If you’re considering franchising your business, contact our Sioux City, Sioux Falls, or Omaha transactions attorneys to help you through the process.