Fitness and nutrition are big business in Australia. From the Michelle Bridges to those rugged ex-My Kitchen Rules blokes, it pays to be in the know on all things health. If you successfully run a fitness or nutrition business, it’s only natural you will want to expand and spread the healthy word beyond your own business’ capacity.
In essence, a licence is a right to use and applies to the intellectual property (branding, copyright and trademarks) and the systems (i.e. the processes in place behind your “get fit quick” program). Licensing also limits your ability to place conditions on that right – something businesses typically overlook when seeking to expand.
Whether you’re a yoga studio, an outdoor boot camp or a health and wellbeing spa, if you’re thinking of expanding but are unsure whether to licence or franchise, we set out some points for you to consider.
1. Do You Want to Implement Systems?
Do you want to dictate the precise methods and systems implemented across the brand? For example, do you want to dictate how classes are run or transactions concluded? If you’ve developed, for instance, Yogalates or a specialist Power Zumba machine, chances are you’ll want that precise model replicated in any other branches of your business. If so, this is more indicative of a franchise relationship.
2. Do You Want Common Marketing?
If it’s your plan to run common marketing campaigns to which all business owners contribute and benefit, this is more indicative of a franchise relationship.
3. Do You Want to be Able to Monitor and Regulate Performance?
It’s often important, for the purpose of maintaining the integrity of your brand, to put in place minimum KPIs and, further, be able to enforce them. If this is an important aspect of your proposed growth, a franchise will likely be the way to go.
4. How Much Interaction Do You Want Between Businesses?
As a franchisor, you will have obligations regarding ongoing training and monitoring which, of course, takes time. Do you have the capacity and willingness to do so? Do you have the experience and business acumen to analyse financial performance and/or provide coaching and training to individual business owners? If you intend to retain your existing business but provide others the opportunity to exploit your systems and intellectual property, you should think about the additional burden this will impose on you as a franchisor.
5. Have you Thought About the Legal Ramifications?
The legal side of setting up a franchise and licence is very different. What’s more, operating a franchise under the guise of a licence agreement can have negative ramifications in the long run. Talk to a franchise or commercial lawyer to understand the difference in documentation and ongoing legal compliance.
Whichever model you propose to adopt, it’s important that you understand the legal ramifications from the outset. If you have any questions about the differences between licencing and franchising, and what they will mean for you and the growth of your business, get in touch with our franchise team.