1. Feasibility
Most but not all businesses can be franchised. It is important that before you look at franchising your business that you satisfy yourself that your business can be successfully franchised. Do you have an existing business which is successful? Is there a market for that goods and services which your franchisees will be selling? Will both you and the franchisee be able to make money? Can you business and systems be easily replicated?
2. Use experts
Many business owners underestimate the value that using the right experts (e.g. franchise consultants, lawyers and accountants) can provide. They believe they will save time and money by doing most of the work themselves. This is invariably not the case. Those who use the right experts usually find themselves selling franchises a lot quicker and easier with less problems down the track. The costs of the experts are usually recouped after the first few franchises are sold.
3. Do you have enough money?
Franchising a business is not cheap. You need to make sure you funds available to you which will meet the costs involved – for example the costs of the experts you need (franchise consultants, lawyers, accountants, printers, marketing experts etc.), the cost of advertising, recruitment costs and branding etc.
4. Protect your intellectual property
Where possible register trademarks. Make sure that your brand names are unique and capable of protection. And most importantly make sure that your brand names do not infringe anyone else's intellectual property rights.
5. Structure
Make sure you have the right structure in place. Separate out your intellectual property into a separate entity. Do you need to establish a trust? Do you need a shareholders agreement? Think about incorporating a separate company for each role – e.g. product supply, leasing, intellectual property ownership and franchisor.
6. Can you be a franchisor?
Not everyone has what it takes to takes to be a franchisor. This is completely different role from operating your own business. You will be training and mentoring your franchisees to be successful operators of their own businesses.
7. Design your system
Take your time to design your system. This will include deciding on issues such as territories (exclusive or not), what obligations will the franchisee have? What obligations will you have? What are the initial fees – ongoing fees? What requirements are there for renewal and transfer? What advertising will be conducted?
8. Suppliers
Having consistency of product is crucial in any franchise system. You will need to source suppliers who are able to supply quality product to your franchisees on the right terms and conditions. Your franchisees will be expecting to receive a list of the suppliers which are approved by you and with whom you have negotiated preferential supply terms. If you or a related company are supplying product to your franchisees you will need to have terms of trade which apply to your franchisees.
9. Manuals
It is essential that you have a manual or manuals which provide your franchisees with all the information they need to run their businesses. Every aspect of running the business needs to be documented. A franchise consultant can help you with the preparation and drafting of your manuals.
10. Recruitment
You should have a plan which deals with how you are going to recruit franchisees. Are you going to use business brokers? What advertising will you be doing? What will the process be?
These are just some tips and are not meant to be a comprehensive list of all the steps you need to take when franchising your business. Franchising your business takes time so take your time and make sure you get the advice you need.
We can help point you in the right direction. Contact Lizandra Bailey on +64-21-774-333 or email her at liz@astutelegal.co.nz
IMPORTANT DISCLAIMER
THIS ARTICLE IS INTENDED TO PROVIDE GENERAL INFORMATION ONLY. IT SHOULD NOT BE RELIED ON AS PROVIDING ANY FORM OF LEGAL ADVICE. YOU SHOULD OBTAIN YOUR OWN LEGAL ADVICE BEFORE ACTING ON ANY OF THE INFORMATION CONTAINED IN THIS ARTICLE.