Franchisor Basics

Franchisor Basics: What Is Franchise Development?

Franchise Development is a business process, encompassing activities that range from the creation of a franchise, to the consulting, sales, and marketing efforts behind franchise offerings. 

Franchise Developers are the people and companies who coordinate all of these activities, converting ideas, business processes, and intellectual property into franchises; and then marketing and selling those franchise opportunities to prospective buyers. Franchise development is different from franchise ownership or investing, although many developers also manage and own franchises and franchisors.

To learn more about what a franchise is check out our article, Franchise Basics: What Is A Franchise?

Developers typically consult, imagine, build, and orchestrate the process of a business, packaging their intellectual property and operating procedures into a franchise offering. Many developers may take this process from beginning to end like Oakscale Franchise Development, however, many smaller developers may only undertake a small portion of the process. 

For example, a developer may assist a franchisor in creating their offering and the creation of their franchise agreements and other documents. Other developers may focus on the sales and marketing of franchises to prospective buyers i.e. franchisees, on the behalf of the business that intends to offer the franchise i.e. the franchisor. These companies are sometimes called Franchise Sales Organizations (FSO).

Many small businesses with well established operations and branding may decide to franchise their brand instead of opening additional locations under their direct management. We cover this in our article, Franchise Basics: What Is The Difference Between A Chain And A Franchise?

Some full service franchise developers who orchestrate the process of development from the beginning to end maintain an exclusive relationship with brands through royalties or equity similar to a publishing relationship seen in the music or publication industries. They take on a great deal of risk partnering with emerging franchise brands for the opportunity of sharing in the success, effectively aligning interest between the parties. There are also smaller, typically not well capitalized franchise developers who may partner with brands for small parts of the development process taking on a retainer and percentage of up front fees for brokering franchise offerings. These development companies have become scrutinized in recent years for their close connection to unscrupulous broker networks and the marketing and selling of marginally successful franchises. 

It is typically in a franchise buyer's best interest to steer clear of franchisors who use non-exclusive development companies who are motivated by upfront deal fees rather than the success of franchise buyers.

Developers typically work with many different counterparts along each step of the process, including digital marketing companies, branding agencies, business consultants, and franchise and trademark attorneys.

Many aspects of the franchise development process are regulated. The offer and sale of franchises in the United States is regulated at the federal level by the Federal Trade Commission (FTC) as well as the state level.

Joshua Kovacs is the CEO of Oakscale, where he leads strategy and development efforts by connecting multi-unit franchise operators and private equity to high growth, emerging franchise brands.
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