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Franchising is a popular business model because it facilitates new franchisees' scalability and regular capital injections. Owing to these features, it can also power rapid brand visibility, which can drive long-term growth. 

For these reasons, you may look to franchising as the best means to growing your business - but may not know how or where to start.  

In this article, we will discuss the various elements involved in launching a franchise business and how to grow a successful franchise.

Creating a franchise business model

Much time and care should be taken with the overall business premise and franchise model. It should provide a compelling proposition to sell to potential franchisees.

As in any new business, this early planning stage is important, but with a franchised business, the importance of this stage is magnified. You’re not just trying to convince your bank manager about your start-up business; you are trying to convince the next cohort of budding franchisees to take on your venture

How can franchising help a business grow?

As a method of expansion for an established and successful business, franchising can help companies to expand both nationally and internationally. Growing a franchise network and taking a franchise fee from each franchisee, is both a scalable and cost-effective way to create revenue.

Franchising can also strengthen your brand and your audience reach and act as a good method of securing your company's future.

Should I prove the business model first before franchising?

Whilst some franchisors go straight to franchise, others think it essential to prove that the business model works before going out to franchise operators.  

There is no right or wrong answer to this, and much will depend on your specific financing and scalability strategy and possibly your skillset. 

However, convincing early franchisees to join with tangible evidence of the model's success in the form of a proven first example certainly helps sell the proposition.

Following this path may also help to reduce risk as it will give you a chance to iron out any issues and fine-tune the processes and procedures. This will allow you to learn how things can work before you scale and find more franchising opportunities.

Being a member apart of an association such as the British Franchise Association or the European Franchise Federation can help to make your business more credible to potential franchisees.

Should I protect intellectual property rights in the initial stages?

Protecting your Intelectual Property Rights (IPR) from the outset is vital. Never has this been more important than when franchising, where you deal with third parties who have their own commercial interests.  

As a franchisor, you should own all the IPR in the brand name, logo, website, designs, manual, trading styles / ‘get-up’, and any other patents, trademarks, copyrights, etc. You then license these to be used by the franchisees in their business solely as permitted by the Franchise Agreement.

 

IP legal advice

 

How important is it to have a Franchise Agreement in place?

The Franchise Agreement is the fundamental framework between you and the franchisee, and it sets out all the obligations of both parties. 

The difference between a good, professionally drafted Franchise Agreement and a bad one could be the difference between the success and failure of your new enterprise.

 

Free franchise agreement template

 

Do I need to draw up a Franchise Manual?

Yes, you need to draw up a Franchise Manual. 

On a practical day-to-day basis, the Franchise Manual is just as important as the Franchise Agreement. The manual should set out how the franchised business should look and run in every respect, and you should monitor this closely. If your franchisees stray too far from the design and operational blueprint, it jeopardises the success and control of the whole network.  

How to select the first Franchisees?

When your new business is in its early stages, selecting the first few franchisees is critical. These small businesses will be instrumental to the early growth phase of the company and provide the ‘shop window’ to the franchisees that follow.  

Considering this, you should select based upon credentials, experience, and financial stability, but above all, their connection with your brand and their desire to grow and enhance it. This final quality will provide the true driver to success for both parties.

Get legal assistance from LawBite

LawBite has experience helping business owners launch their ventures and reach their commercial ambitions. To find out how we can support you with getting your franchise business up and running, book a free 15 minute consultation or call us on 020 3808 8314.

 

Additional resources

In closing

Nothing in this article constitutes legal advice on which you should rely. The article is provided for general information purposes only. Professional legal advice should always be sought before taking any action relating to or relying on the content of this article. Our Platform Terms of Use apply to this article.