7 Steps to Franchising Your Restaurant

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Table of Contents

• Solidify Your Business Operations
• Do Your Research
• Register Your Intellectual Property
• Consider a Fee Structure
• Prepare a Franchise Agreement
• Market Your Franchise
• Invest In Your Relationships 
• Key Takeaways
• Frequently Asked Questions

As a restaurant owner, you might wish to take advantage of the franchising business model and turn your restaurant into a successful chain. Indeed, franchising can be attractive for several reasons. For instance, franchises are a great way to expand your business by reaching a broader market nationally or globally. This article will take you through seven key steps for franchising your restaurant. 

Solidify Your Business Operations

The first step for franchising your restaurant is to solidify your business operations. Essentially, you should ensure that your business operates as smoothly as possible. Prospective franchisees will want to ensure that the restaurant they purchase is a turnkey operation. This means you should ensure that every aspect of your business is refined so that you can document the entire process and pass it on to your franchisees to assist them in operating their business well. 

An established business with visible success will be more attractive to prospective franchisees. The original restaurant will likely serve as an indication of profitability for potential franchisees. As such, you should ensure that your business is doing well financially before considering franchising. 

Do Your Research

Before deciding if you should franchise your restaurant, you need to consider the market carefully. This includes understanding the following:

• the ease of replicating the success of the original restaurant;
• how unique your franchise will be compared to others; and
• potential limitations to franchising your business include customer demographics, supply chain and unique locations.

By understanding the market, you can consider any issues that might arise and address these before franchisees ask the same questions. 

You should also seek advice from several experts before franchising your restaurant. For example, you should consider discussing your venture with an accountant, lawyer and business advisor. They will be able to advise on any financial or legal limitations to your goal and provide valuable insights into the best way to be successful. 

Register Your Intellectual Property

When you enter a franchise agreement, the most valuable asset you pass on to your franchisees is a license to use your trade marks. This might include your restaurant’s logo, name, slogan, unique products or even colours. 

Therefore, a major step in franchising your business will include reviewing your trade marks to ensure they are valid for registration and filing a registration application with IP Australia for better protection from competitors. 

Consider a Fee Structure

Naturally, you want your franchises to be profitable. This will encourage growth and draw other franchisees to your network. A key part of ensuring your franchise is profitable is ensuring the fees you charge franchisees are reasonable and manageable for a growing business.

There are two main costs to consider being upfront and ongoing. Upfront costs are what the franchisee pays to purchase and establish the business, while ongoing fees give the franchisee the right to use your brand and systems over a period of time. 

You should also consider third-party costs that a franchisee may incur to set up the restaurant, particularly to fit out the premises, and the working capital needed to finance the day-to-day operation. Additionally, you should also consider how much input, control and responsibility you have over the franchise premises, supply and general operations.

Prepare a Franchise Agreement

The next step for franchising your restaurants is to develop a franchise agreement. The franchise agreement is a legally binding contract establishing the rules of the relationship between you and your franchisee.

Some key things to include in your franchise agreement are:

• fees and payments, including initial and ongoing costs;
• length of the agreement and ongoing periods; 
• the training and support you will provide to franchisees;
• rights and restrictions for the use of intellectual property;
• the requirement to use certain equipment and products for the business. For restaurants, this might include a requirement to purchase ingredients from specific suppliers; 
• marketing requirements, including types of advertising and minimum expenditure;
• premises and fit-out requirements;
• the rules franchisees must follow before selling their franchise;
• dispute resolution methods; and
• circumstances under which the franchise can be terminated.

Market Your Franchise

You must take the time to develop a method for recruiting and assessing potential franchisees. Accordingly, you need to consider the following:

• what type of franchisee you are looking for;
• how you will find them; and
• how you will assess their ability to operate and promote the franchise. 

This is especially important in the early stages of franchising your restaurant, as the initial franchises will set the tone for the rest of your franchise. You might wish to consider recruiting your existing employees as your first franchisees. Likewise, as a restaurant owner, you might also want to ensure that your first franchisees have experience working in a restaurant and understand the specific demands of the industry. 

Invest In Your Relationships 

Finally, you must invest in your relationships with your franchisees early on. This might include providing training and networking opportunities that will allow your franchisees to succeed and therefore facilitate the growth of your entire franchise. You should ensure that your franchisees know your restaurant’s offerings and the best way to ensure that the food and service are delivered consistently across your entire franchise. 

Therefore, you should also consider how you will assess the growth and success of your franchisees. This might include measures based on sales targets, quality guidelines, turnover, foot traffic or customer feedback. Acknowledging the successes of your franchisees will ensure they feel valued and therefore, motivated. This will contribute to expanding your restaurant franchise and ensure you can continue your growth trajectory. 

Key Takeaways

As a restaurant owner, you might wish to take advantage of the benefits of franchising and build your restaurant into a successful chain. The seven key steps for franchising your restaurant include:

• solidifying your business operations;
• doing your research; 
• registering your intellectual property; 
• establishing a fee structure; 
• preparing a franchise agreement;
• marketing your franchise; and
• investing in your relationships.

If you need assistance franchising your restaurant, our experienced franchise lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.

Frequently Asked Questions