- Before franchising a business, it should be pilot tested with company-owned and operated outlets. The business should also be replicable, successful and distinctive. This pilot program will create the Franchise System.
- The Franchise System is the most critical part of franchising – a precise, well-documented system that can be easily followed by franchisees will ensure a successful franchise.
- If you are interested in franchising your business, hiring a franchise lawyer is essential in preparing the correct documents. A franchise lawyer will assist you with a comprehensive agreement and register any necessary intellectual property assets.
Benefits of Franchising a Business
There are numerous benefits in franchising a business in Australia, for both franchisees and franchisors. It is a fruitful way of expanding an already successful business with minimal risk if executed correctly. Notably, Australia is the most franchised nation (per capita) in the world.
Growth and Expansion
The business can grow into a large network through the resources of the franchisee. This growth can be achieved very quickly with highly motivated and hard-working individuals – it is crucial the franchisee selection process identifies people with drive and ability to focus on delivering the franchise system. A franchise system allows business owners to grow a business rapidly as there are few impediments to growing a business.
Capital needed to expand a business is much lower through a franchise system. The ongoing fees paid by franchisees will also generate significant revenue for the franchisor. This ongoing source of fees and revenue is a significant benefit over other types of business systems.
Tested and Detailed Business Systems
Franchisees essentially buy a turnkey business with all the important components and systems already determined. If a system is systematised in this way, its business operations can be easily documented.
- There are certain disadvantages to franchising, including costs involved and loss of control.
- Franchising a business is not a testing ground for a new business idea. You should use an existing business model that has proven to success.
- For a business to be franchisable, it should be profitable, credible, unique and transferable. Its business system should also be teachable, and support should be provided by the franchisor.
Steps in Franchising a Business
If a business owner has an established and successful business already in place, franchising a business can be relatively straightforward with the assistance of a franchising lawyer to draft and review the documents.
Understanding your Business
The first step in franchising a business is preparing a business plan that will consider the structure of the franchise, the profile of the franchisees and the territories that can be allocated to franchisees. Other considerations include staffing resources and the proposed franchising support system.
Pilot the Franchising System
A franchise system can be tested out as a concept with a few initial outlets. Over a trial period of 12 to 18 months, a Franchisor can test systems and procedures and amend the Operations Manual to suit.
Developing an Operations Manual
Every franchise system needs an Operations Manual, which establishes the procedures and processes of the franchise. This includes how it should be operated and day-to-day processes, including training of employees and intellectual property assignment.
Frequently Asked Questions about Franchising a Business
Q: What is a franchise agreement?
A: A franchise agreement is a document that governs the relationship between the franchisor and the franchisees. It includes the duration of the agreement, rights of renewal and termination process.
Q: What is the Franchise Code of Conduct?
A: The Franchise Code of Conduct provides the national regulations for franchising – it sets out the rights and responsibilities of franchisors to franchisees including disclosure of information and regulations concerning the franchising system.
Q: How much does it cost to franchise an idea?
A: This will depend on the franchise system and the complexity of the business. A large system will cost into the tens of thousands as it will require a broader identification of markets, territories, locations, etc.
Q: What is the Franchise Council of Australia?
A: This is the peak body for franchise organisations and businesses in Australia. It promotes the exchange of information between franchises.
Q: Can you franchise an idea?
A: This is not possible – you must franchise a tried and tested business formula that has already been in existence.
How can LegalVision help me?
LegalVision assists businesses and individuals with tailored online legal advice for a fixed-fee. We specialise in franchise law and can assist you with any stage of franchising a business. Call LegalVision today on 1300 544 755.