How to Successfully Franchise Your Business

Franchising is one of the most convenient ways of expansion for a small business. It takes away the hassle of managing more than one location singlehandedly. Entrepreneurs can pass on the responsibility to franchisees and make them follow the standardised operating procedures. It ensures that their products and services reach new markets without any work or expenditure on the expansion.

However, franchising your business is easier said than done. The existing business must be profitable and easily replicable to build new franchise units that can utilise the distinguishing processes. It takes a lot of research, preparation and compliance with legal obligations. So, here is how entrepreneurs can successfully franchise their businesses in Australia to expand without stress or legwork.

Understand the Franchise Industry and Obligations

Before stepping into the world of franchising, entrepreneurs must equip themselves with all the information about the industry. They must seek advice from their accountant and lawyer to determine if franchising is right for the business. They must know the Franchising Code of Conduct, the role and responsibilities of the franchisor and the franchisee and Australian consumer Law.

Once they are sure about franchising, they must create a franchise profile on the Franchise Disclosure Register which will help them know their regulatory obligations. The profile is helpful for potential franchisees who want to get disclosure information about the franchise.

Prepare a Business Plan for Franchising

Franchisors have to prepare a business plan for franchising that will help them set the goals, vision and mission for the expansion. It will lay down the plan for the number of units that will be established and the requirements related to their establishment. It will cover the list of suppliers and stock needed by each unit and the cost of procurement.

The plan will describe the marketing strategy for promoting the brand and advertising the new locations to attract franchisees. The business owner must ask the accountant to help with the cash flow forecasting of the individual units to ascertain financial projections and their feasibility.

Prepare the Documents and Protect Your IP

The next step is to start preparing the franchise disclosure documents that must be provided to potential franchisees to help with the due diligence process. The franchisor also needs to prepare the operations manual, which informs the franchisee about the daily management of the unit.

Another significant task is to save your intellectual property by registering it. For example, the logo must be a registered trade mark along with all the other branding materials unique to the business. The franchisees will get the licence to use the IP and will be restricted from using any other branding collateral.

Identify Locations for New Sites

Franchising requires identifying new markets where the business can expand. It needs market research of geographical regions to determine the demographics of the population and the demand for your products. The franchisor also needs to determine the level of competition and the possibility of gaining a significant market share.

The franchisor also needs to determine if they wish to choose the commercial property for the unit or leave the task to the franchisee. If they identify the property, they need to assist the franchisee in lease negotiations. After the unit is leased, the franchisor needs to decide on the fit-out, furniture and interior design to maintain consistency.

Evaluate the Franchise Value and Other Fee

The franchisor must get the franchise valuation done by expert accountants in the field, who take trending market prices and expenses incurred in franchising into consideration. They will help you decide on the fair franchise fee and ongoing royalties, which are usually a percentage of the profits earned by the franchisee.

In addition, the franchisor needs to decide the marketing fund that must be paid by the franchisee regularly for branding and promotions. The accountant will help you understand the tax and recordkeeping obligations as a franchisor.

Develop the Training Modules and Support Plan

One of the significant aspects of franchising is training franchisees to ensure they are prepared for the operations. It helps to maintain standardisation across units. However, the franchisor has to provide this training and needs to create a schedule for the same. They must create an industry training and on-site training program along with study material for reference.

In addition, they have to ensure that they are available to provide the required support to the franchisee without fail. They can appoint a manager to provide ongoing support to the franchisee and help them overcome challenges with the help of expert assistance.

Wrapping Up

Franchising your existing business successfully requires research and thorough paperwork. It is vital to align with professionals like accountants and lawyers to ensure you comply with the laws and make informed investment-based decisions.