U.S. franchising is projected to surpass $920 billion in economic output in 2026 across roughly 845,000 establishments, according to the International Franchise Association. Behind that figure sits a full ownership lifecycle: converting a company into a franchise, buying into an existing brand, operating units, valuing them, and eventually selling. This guide describes how to franchise a business at each of those stages in the United States.
Franchising a Business vs Starting a Franchise
The phrase how to franchise a business covers two distinct roles that are often confused. One is the franchisor side: an existing company replicates its model and licenses it to others. The other is the franchisee side, which is what most people mean by how to start a franchise business, where an entrepreneur buys the right to operate under an established brand.
This article focuses on the wider lifecycle that surrounds both roles. For a detailed walkthrough of becoming a first-time operator, the dedicated L’Express Franchise article covers the getting-started path. What follows looks at building, buying, owning, valuing, and exiting a franchise system.
How to Turn Your Business into a Franchise System
Franchising a business is the process of licensing a proven concept, brand, and operating system to independent owners in exchange for fees. The question of how to turn my business into a franchise generally begins with whether the model can be replicated by someone else and remain profitable. The steps below outline what the process typically involves.
Test whether the model is franchisable
Before learning how to make your business a franchise, owners commonly assess replicability. Factors frequently cited in industry resources include a track record of profitability, systems that a new operator can follow, and demand that extends beyond a single location.
- Proven profitability: at least one unit operating at a consistent margin
- Repeatable systems: documented processes rather than owner-dependent know-how
- Transferable brand: a name and identity that travel to new markets
Prepare the Franchise Disclosure Document
In the United States, franchising is governed by the FTC Franchise Rule (16 CFR Part 436). According to the Federal Trade Commission, franchisors must give prospective franchisees a Franchise Disclosure Document (FDD) at least 14 calendar days before any payment or binding agreement. The FDD contains 23 items of information, including fees, the estimated initial investment, and litigation history.
Build the operations manual and brand assets
An operations manual translates the founder’s methods into instructions a franchisee can follow. Trademark protection through counsel and a defined territory model are also common elements. These pieces apply whether the goal is to franchise a service business, a retail concept, or how to franchise a landscaping business, where standardized routes, equipment, and pricing form the core of the system.
Recruit and support franchisees
After the legal foundation is in place, franchisors turn to recruitment. This stage commonly involves franchise marketing, attendance at franchise expos, listings in directories, and a qualification process for candidates. Initial training and ongoing field support are part of most systems, since the brand’s reputation depends on consistency across every unit a franchisee opens.
The same framework applies across sectors. A founder asking how to franchise a service business faces the same FDD, trademark, and registration requirements as one franchising a restaurant or retail concept. What differs is the operations manual: a mobile or home-based service model documents routing, scheduling, and equipment, while a brick-and-mortar model documents layout, inventory, and staffing.
Good to know
Several U.S. states, including California, Illinois, Maryland, Minnesota, and New York, require franchisors to register or file their FDD before offering franchises in that state. Requirements vary by jurisdiction.
How Much Does It Cost to Franchise a Business?
The cost to franchise a business depends on concept complexity, the number of states targeted, and the professional services involved. The ranges below reflect figures commonly reported in franchise legal and development resources. They describe what franchising a small business or a larger concept can involve, not a fixed quote.
| Cost Component | Typical Range |
|---|---|
| FDD drafting and franchise agreement (legal) | $15,000 to $45,000 |
| Trademark registration through counsel | $1,500 to $3,500 |
| State registration (per registration state, legal) | $1,000 to $3,500 |
| Operations manual and brand development | $10,000 to $50,000 |
| Franchise management technology (setup) | $25,000 to $75,000 |
| Annual FDD update and renewals (ongoing) | $4,000 to $15,000 |
Ranges commonly cited in franchise development and legal resources, 2025. Actual costs vary by concept & state.
Industry resources have reported total first-year franchise development budgets ranging widely, with some estimates exceeding $1 million once marketing, technology, and recruitment are included. Marketing and brand development alone can account for a substantial share of that first-year spend.
These figures are separate from what a franchisee pays to join the system. The franchisor incurs development costs to create and sell the opportunity, while the franchisee pays a franchise fee and an initial investment to open a unit. Both sides of the model carry distinct costs, and confusing the two is a common source of error when budgeting.
How to Value a Franchise Business
Valuing a franchise business typically relies on three methods: income, market, and asset-based approaches. The market approach, using earnings multiples, is the most common for owner-operated franchises.
SDE vs. EBITDA multiples
- SDE: Used for smaller, owner-operated franchises (typically under $1 million in discretionary earnings).
- EBITDA: More common for larger, manager-run businesses.
- Typical EBITDA multiples vary by industry, ranging from 2.5x–4.5x for service franchises, 2x–3.5x for retail, and generally lower for restaurants.
Final valuations also reflect franchise-specific factors, including brand strength, royalty obligations, lease terms, territory rights, transfer fees, and the remaining franchise agreement.
The income approach values the business based on normalized cash flow, adjusted for risk. For franchises, key risk factors include brand recognition, franchisor support, and the transferability of the location and customer base.
How to Sell a Franchise Business (Exit Strategy)
Selling a franchise system marks the final stage of a franchisor’s journey. The sale transfers ownership of the brand, franchise agreements, and recurring royalty income to a new owner.
The system’s value is driven by predictable royalty income, network size, growth, franchisee retention, and brand strength.
Franchisors also oversee the resale of individual franchise units. Most transfers require written approval to ensure buyers meet brand standards, clear any outstanding obligations, and sign the current franchise agreement. This process helps maintain network stability and protect recurring royalty income.
The franchise agreement’s transfer clause also outlines transfer fees, approval requirements, and any right of first refusal. Approval often takes 90–120 days.
Resale value depends on factors such as the remaining franchise term, financial performance, franchisor reputation, and the condition of the business. Many owners use franchise resale brokers or the franchisor’s internal resale network to connect with qualified buyers.
Step-by-Step Overview (Condensed Lifecycle Model)
Viewed as a whole, the franchise lifecycle moves through four phases. This step-by-step guide frame applies whether someone enters as a franchisor building a system or as a buyer acquiring a unit.
- Build: operate a profitable concept and document repeatable systems
- Franchise: prepare the FDD, register where required, and recruit franchisees
- Scale: add units through single-unit, multi-unit, or area development agreements
- Buy or sell: acquire existing units or exit through a franchisor-approved transfer
According to the International Franchise Association, franchising is projected to add more than 12,000 new units and support nearly 8.9 million jobs in 2026, with the sector contributing an estimated $558.4 billion to U.S. GDP. That backdrop shapes activity across all four phases of the lifecycle.
This content is provided for informational purposes only and does not constitute legal, tax, financial, or professional advice. Laws and regulations vary by state and individual circumstances and may change over time. Readers should consult a qualified attorney, tax professional, or other licensed professional regarding their specific situation. Nothing herein creates an attorney-client relationship.
Frequently asked questions about how to franchise a business
Franchising a business involves licensing a proven concept, brand, and operating system to independent owners in exchange for fees. In the U.S., franchisors must also comply with FTC rules, including providing a Franchise Disclosure Document (FDD) before any agreement is signed.
The process typically includes testing whether the model is replicable and profitable, preparing the FDD, building an operations manual and brand assets, and then recruiting and supporting franchisees to ensure consistent performance across locations.
Legal fees for an FDD and franchise agreement are commonly reported at $15,000 to $45,000, with trademark, state registration, operations manuals, and technology adding more. Total first-year development budgets are sometimes reported above $1 million once marketing and recruitment are included. Costs vary by concept and the number of states involved.
Franchise businesses are commonly valued using income, market, or asset-based approaches, with earnings multiples (SDE or EBITDA) being the most widely used. Key factors include profitability, brand strength, royalty obligations, growth potential, and remaining franchise agreement terms.
