My business is doing well and I want to maximise its returns. Should I start a franchise, and how do I do it?
This article is about turning your own business into a franchise. For more info on buying into an existing franchise, click here.
Not everyone is cut out for franchising. It requires the right attitude, hard work and a team of professionals to guide you. If your business has structures in place and provides the right product or service, then franchising may help you make the most of your brand. It’s not cheap to set up a franchise, but the rewards can be well worth it.
There are a number of important steps to starting a franchise, including market research, and securing finance, and we can advise on these; but this article will focus more on the tasks you must complete to ensure your new franchise is legally compliant and protected.
From a legal perspective, you need to:
Ensure your business has the proper structures in place
Your business needs to have developed the proper infrastructure for one branch to succeed before you can start other branches. You need to be trading profitably, and have tried and tested systems in place e.g. labour procedures, admin, sales, accounting and marketing.
Develop training material for franchisees
The goal of starting a franchise is to get franchisees to buy into it, and run it successfully. You will therefore need to develop a Training Manual for the use of your product and provision of your services, and an Operations Manual to guide franchisees through the running of the franchise.
Securing your intellectual property is now more important than ever
Your business/product name and slogan are the badges which signal your reputation, and are the signs many consumers look for when choosing a product. Now that you’re scaling up, it is more important than ever to secure the rights to your intellectual property by trademarking your name, logo and slogan (and patenting your invention, if you have one).
Forgetting this step can have disastrous consequences – you could find your product name being used by a competitor, or worse, trademarked by someone else, thereby preventing you from using it! For more information on the importance of securing trademarks, see our article here.
Get a legally compliant Franchise Agreement and Disclosure Document drawn up
The Franchise Agreement is a crucial document which protects your rights as the franchisor by setting out the franchisee’s obligations and the consequences of non-compliance. Franchise Agreements must be expertly drafted to ensure that they are compliant with the Consumer Protection Act (CPA) and Franchise Regulations, as non-compliant contracts can be invalid - imagine what that means for a franchisee who may be trying to exit its agreement with you!
The Disclosure Document is an information pack which all franchisors are required to provide to potential franchisees, to enable them to evaluate the franchise opportunity. The Disclosure Document must contain information about the franchise like its history, financial statements and litigation history (i.e. whether it has been sued before!), and must also be compliant with the CPA and Franchise Regulations.
Have a team of experts to guide you
Enlisting the help of franchise specialists can help make the process smoother. For example:
you will need someone to help you identify potential franchise locations;
you will need a marketing team to help scale up the marketing of your product; and
you will need specialist attorneys to help draw up the above documents, and to advise you on legal matters that arise – for example, you meet with a potential franchisee, but he wants to change half of the terms of the agreement. You’re keen to get another franchisee on board, but what is the risk should you accept the amended terms? We can advise you on this and other aspects of the franchising process.
Ready to get started? For more information or to arrange a consultation, contact us here.