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When you create a distinctive brand and operate successfully for years, you may want to grow the brand further. Thus, you may be considering whether you should franchise your business. Although it is not a requirement for franchising that you have an established business, it gives you a commercial edge. Thus, you should demonstrate your brand’s success in the current market. Furthermore, there are also a few ongoing obligations for the aspiring franchisor to consider in addition to the initial setup. This article will discuss the benefits of setting up a franchise model to grow your business. It will also outline a few key considerations for whether you are ready to franchise.

Planning for Business Expansion

Franchising your business is one of a few ways to expand your business.

At the simplest level, a business owner may decide to expand the business by setting up new stores or locations, paying the relevant costs themselves, and arranging for each store or location to be managed by company employees.

A franchise model allows you to expand and leverage your brand in multiple ways. For instance, you can:

  • expand the geographical reach and presence of your brand;
  • curate a consistent customer experience within your chosen state of operation or across Australia (should you so desire); and
  • expand your engagement on social media and grow your loyalty base.

Notably, you can also achieve all of the above growth indicators by operating several stores or managing several locations across the state. However, generally, business owners will hit a ‘growth ceiling’ where they do not have the local expertise or resources to expand. Therefore, the franchise model allows you to be financially rewarded as you can receive a regular:

  • ‘royalty’ fee in return for the right to use your intellectual property; and
  • marketing contribution amount in return for your efforts coordinating the centralised marketing efforts of the network.

Managing Your Risk

Franchising your business has the benefit of mitigating the financial risk commonly associated with rapid expansion. For example, the business owner who expands through corporate growth increases their exposure each time they:

  • hire new staff to operate a new business location; and
  • enter into a new lease for a new store.

Managing Your Resources

As a successful business owner, you will be familiar with the expression ‘time is money’. Thus, you should franchise if you decide to leverage the time you have invested towards establishing your brand and reality testing your business model. Furthermore, you must be prepared to invest more time into supporting a business owner who wishes to join your brand.

A rewarding and sustainable relationship between a franchisor and franchisee requires you to develop and maintain ongoing levels of trust and support. Disputes most commonly arise where communications between a franchisee and franchisor are infrequent, uncourteous or unclear. Therefore, you should always maintain positive franchising relationships.

You may wish to consider whether you are ready to:

  • arrange or conduct the initial and ongoing training a franchisee may require;
  • conduct regular meetings with franchisees; and
  • develop and implement marketing strategies for the franchise system.

In some cases, franchisors choose to outsource these tasks for a more qualified person to support franchisees at the head office level.

Therefore, time scarcity alone should not deter you from franchising your business. However, you must ensure you understand your commitments.

Negotiating Franchise Agreements Factsheet

When bringing on board new franchisees, it is important to negotiate agreements that strike a balance. This factsheet explains how.

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Protecting Your Brand

Suppose your business plans align with the opportunity to create a franchise network. In that case, you must ask yourself whether you have taken all the necessary steps to protect the brand you wish to commercialise. For instance, in establishing your business, your internal processes and systems of operation will likely comprise a body of resources that become the intellectual property of your business. 

By law in Australia, copyright protects the integrity of your works and creations. It does not require you to take active steps towards becoming the registered owner of your intellectual property.

However, let us say you are considering franchising your business within the next year. In that case, you must apply for a registered trademark to protect your brand name, logo or any key slogans, taglines or hashtags. 

Key Takeaways

If you want to expand your business in a structured way, you may wish to consider a franchise model. The franchise model provides many business owners the opportunity to overcome ‘growth ceilings’ and manage inevitable risks and resourcing requirements. 

If you need help with setting up a franchise, 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

How can a franchise model help me to expand my brand?

A franchise model allows you to increase your geographical reach, curate a consistent customer experience and expand your social media engagement, among others.

What are some of my obligations as a franchisor?

As a franchisor, you will need to arrange for initial and ongoing franchisee training, conduct regular meetings and develop marketing strategies for your franchisee network, among others.

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