Your business is a success. You have captured a portion of the market, are generating profit and increasing your brand recognition. When this happens, you naturally begin thinking about expanding and replicating that success. One option is establishing a franchise whereby you will, effectively, allow others to use your established branding and business systems to implement a duplicate business to yours. And of course, pay you for this privilege.

Although establishing a franchise to fuel growth and increase revenue may sound great in theory, there are some questions franchisors should ask themselves before they begin recruiting franchisees.

Do I Understand What is Involved With Being a Franchisor?

The Franchising Code of Conduct (the Code) imposes strict obligations on franchisors on, among other things:

  • The provision of disclosure (usually annually),
  • The issue of breach notices, and
  • Dispute resolution mechanisms.

In reality, franchisors should implement systems of ongoing monitoring, updating, and training across the franchise network. This naturally takes time and quite a bit of it.

Is my Intellectual Property Adequately Protected?

In franchising your brand, you are allowing third parties to exploit your business’ branding, logos and intellectual property for their commercial benefit. Before you do so, it makes sense to protect your intellectual property comprehensively by registering trade marks and/or patents, and taking steps to understand copyright.

Am I the Key to Success, or the Business Itself?

Sometimes, a brand or business’ success is attributed to an individual. In that case, it’s understandable that another person may not be able to duplicate the business’ success. For example, imagine going to ‘Bondi Vet’ and not having the hunky Dr. Chris Brown attend to your pet’s needs. It just wouldn’t be the same and, no doubt, the initial success of the vet business would unlikely be duplicated by franchisees (unless they were equally hunky).

Do I Have Sufficient Funds to Establish a Franchise?

It costs money to set up a franchise, and you will need to pay for, among other things:

  • Drafting your franchise documents,
  • Protecting your Intellectual Property,
  • Recruiting potential franchisees, and
  • Software and IT updates.

It may be prudent to talk then first to your accountant or a financial advisor to determine whether you are financially ready to franchise your business.

Conclusion

If you are considering franchising your business, it is sensible to talk to a specialist early in the process. LegalVision’s experienced franchise lawyers can step you through what is involved from a legal perspective and assist you in drafting the necessary documents. Questions? Please get in touch on 1300 544 755.

Emma Jervis

Ask Emma a Question

If you would like further information on any of the topics mentioned in this article, please get in touch using the form on this page.