Growth

How to franchise a business for children's activity providers

Growth is on the mind of a lot of children’s activity business owners. If you are looking to expand within your community or grow in a new location, franchising can be a great option. When you franchise, you get the opportunity to expand your business’ reach while bringing more team members into the fold.

There are a lot of children’s activity businesses who have franchised and found success. Shredder, an indoor ski and snowboard program, has more than 6 locations in Colorado and now Illinois. One of the most important elements of success when franchising a business is organization. Using a class registration and management software like Sawyer can help children’s activity businesses franchise more easily and efficiently.

What is a franchise?

The International Franchise Association defines a franchise as “a business model where one party, the franchisor, grants another party, the franchisee, the rights to operate under its established brand and business system. The franchisor provides the brand name, logo, and operational structure, while the franchisee typically pays an initial fee and ongoing royalties to run the business using these resources.”

In layman’s terms, when you franchise your business, you give someone else the right to run your business in another location. They are the owner of the franchise, but they pay you a fee for the licensing as well as ongoing payment based on your agreement.

Two different types of franchises:

  • Business Format Franchising: This is when the franchisor provides the franchisee with a complete business model, including branding, operational systems, and training. This is common with fast food and other franchises where the franchised business is basically identical to the original.
  • Traditional (Product Distribution) Franchising: In this type of franchise, the franchisee is given the right to run their business within the model of the original, but there are fewer operational constraints than Business Format Franchising.

Advantages of franchising

Now that you have a sense of what franchising is, you can think more about the advantages of franchising your children’s activity business.

1. Upfront capital

One of the biggest advantages of franchising your business is access to capital. When you enter an agreement with a franchisee, then they pay you some money upfront. Unlike a small business loan, this capital is debt-free and it is not finite, you will continue to receive funding as the franchisee finds success.

2. Efficient expansion

When you franchise your business, you get the benefits of expanding without the added effort and cost of finding a new location, signing a lease, setting up the space, and marketing to a new audience. You can spend time focusing on your current business while your franchisee gets up and running.

3. Increased brand awareness

Getting your name out there is one of the best ways to increase your customer base. Franchising your business helps increase your brand awareness so that more people will know what you do and want to book your activities. Because of the franchising agreement, you, as the franchisor, will receive royalties or some payment when your franchises do well. Plus, as more and more people book with your franchisees, you will likely see a bump in bookings at your original business as well.

4. Growth with reduced risk

In general, franchising your children’s activity business gives you the opportunity to grow while reducing your overall risk. The franchisee will take on the liability of opening a new business and you get the benefits of a new location and new customer base. In addition, the franchisee is a new business entity so legally, you as the franchisor are protected from any potential missteps.

Disadvantages of franchising

Any business decision comes with pros and cons. There are plenty of advantages of franchising, but it is also important to think about the potential disadvantages that come with making the decision to franchise.

  1. Loss of some brand control. When you sell a franchise, you lose some of the control over your business. It’s part of the process. That is why it is very important to fully vet your potential franchisees and make sure you are more than comfortable relinquishing some of that control.
  2. Potential for legal disputes. Any time you enter into a legal agreement, you open yourself up for potential disputes or issues. Franchising is no different. Make sure you have a good lawyer and you trust your franchisee before entering into this agreement.
  3. Investment. Before you find a franchisee, you will need to invest time and sometimes money into the search. You will also need to invest in a lawyer and/or a consultant to help you get the process started.

How to franchise a business for children’s activity providers

Interested in franchising your children’s activity business? Follow these steps!

Step 1: Make sure your business is ready to be franchised

Before you can find a franchisee and enter an agreement with them, it is important to check the health of your business and make sure it is even possible.

Some questions to ask:

  • Is my business healthy? Is it profitable?
  • Can my business be modeled effectively?
  • Do I have the materials (lesson plans, training models, etc) to help my franchisee run their business the right way?
  • Do I have time and the ability to train and teach my franchisee?
  • Is there enough need in the community for another one of my businesses?

Step 2: Set up the necessary protections for your business

When you franchise your business, you share a number of items with the franchisee that should be protected. You will share your brand and brand guidelines, intellectual property, lesson plans, and much more. Make sure you protect these items before you enter your franchising agreement.

Step 3: Prepare a franchise disclosure document (FDD)

Before you can actually sell a franchise to your franchisee, you need a franchise disclosure document (FDD). We recommend working with a lawyer and/or franchise consultant to prepare this document correctly. An FDD must contain 23 specific sections according to the Franchise Rule determined by the Federal Trade Commission (FTC), including information about the franchisor and their business experience, litigation, prior bankruptcies, fees and investments, obligations, financing, and more. See the whole list via the FTC.

Step 4: Draft the franchise agreement

Separately from the FDD, you will also need a franchise agreement. This is an official contract between you and your franchisee. It explains the obligations and expectations of both parties. The franchise agreement doesn’t need to follow a specific structure like the FDD, but it should be clear and leave nothing up to the imagination. Work with a lawyer and consultant to build this agreement. Some items to definitely include in your franchise agreement would be any specifics about fees, investment, and payment, terms and conditions around renewal and termination, timelines, sales requirements, and more.

Step 5: Create operations and training models

As the franchisor, you need to provide operations and training models for your franchisee. They need to run their business the same way you run yours and it is your job to provide them with the information that they need to do that successfully. Since it is part of the agreement that the franchisee follow your models, you need to make sure you build effective, intuitive, and clear models for them.

Step 6: File or save your FDD

Some states require your FDD to be filed with the FTC and others just require it to be signed and saved or registered. Look up the rules in your state and then follow the instructions to make sure your franchise is legally compliant.

Step 7: Strategize for success

After your franchise is legal, create a sales and marketing strategy to let your current customers know that a new franchise is opening. Get the word out because your franchisee’s success is your success! Plus, work with your franchisee to help them get to know the business and your customers so they can start on the right foot.

Franchising your children’s activity business is a great way to grow, expand your audience , and increase your revenue. It might feel like a long road, but it can help your business tremendously if you are in the right place to do it. 

If you are looking for more guidance on running your children’s education and activity business, the team at Sawyer is here to help.

With our suite of tools, like custom forms to record allergies and t-shirt sizes, flexible payment options like gift cards and installment plans, and seamless scheduling and registration on any device, Sawyer saves business owners 28 hours per month. If you are ready to spend less time on admin and more time doing more of what you love, start a free trial or schedule a demo.

You’re all set!
Download
By signing up, you accept our Terms of Use and have read our Privacy Policy.
Oops! Something’s wrong. Please refresh and try again.

Frequently Asked Questions

No items found.
To see Sawyer for Business in action, speak with our team today.
Get Started
Similar Posts