When most of us think about franchises, we are referring to the business-based franchise like the top 500 franchises published in Entrepreneur magazine each year.

Entrepreneur's 75 different categories range from automotive to services, but they all have one thing in common–a systematic method to deliver services or products.

You, the franchisee, have supported this system with your royalties and initial purchase price and it now will be one of your biggest assets as you decide to grow your business. Since the systems for the franchise are already in place, your biggest concerns as you grow your business are:

Finances - having sufficient capital and resources
Location - for many businesses, location is critical. More on location.
Employee training
Culture transition

Employee Training and Culture Transition
You have worked the business in the first franchise location, so those employees have translated your style into their work habits. They have seen by example how to handle a customer. To expand, you are required to hire people who will accept your style and be able to train other employees in that culture without your presence. Turnover of employees is expensive and time-consuming. Finding the right managers who can train and translate your wishes should be high on your priority list before taking on that second location.

How will your role change? Will you still manage the first location with a manager in the second or will you try to manage both? Trying to be in two places at once is difficult if not impossible. Will you put a manager in each location and personally tackle marketing and public relations? Can you relinquish control? It may be harder to do than you think.

Due Diligence
Be sure you exercise due diligence and investigate the following before you decide to expand:

1. Figure out why the franchisee is selling. If it's because the franchise is not successful, you need to figure out why. Lack of motivation or self-discipline, poor territory, inability to keep employees–there could and will be many reasons. You have the advantage of knowing the system so it is easier to differentiate perception from reality.

2. Protect yourself from liabilities. You will want to do a net asset sale to protect yourself from liabilities connected to the present owner with an indemnification clause. Even though s/he may have given you several reasons they want to sell, you may never know the true reason, so make sure to protect yourself from any outstanding legal actions.

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