Courier franchises are a growing opportunity. In 2015, the Australian courier industry reached $4 billion. With delivery speed becoming a key indicator of customer satisfaction (and complaints), courier services are particularly attractive to small businesses and e-commerce retailers. This article summarises five critical considerations for anyone thinking of starting a delivery courier franchise.

Territories

Courier franchisees will be interested in whether the franchisor will offer them an exclusive territory. Typically, the higher the level of exclusivity, the more valuable the franchise business.

Exclusivity Level Explanation
Operational and marketing exclusivity The franchisor promises that they will not allow other franchisees to operate or advertise within that area
Marketing exclusivity (“local marketing area”) The franchisor allows franchisees to operate in the same area but restricts them from advertising in similar areas
Individual territories, but no guarantee against deliveries The franchisor restricts franchisees to operating within a particular area but offers no guarantee that another franchisee may not occasionally deliver to the territory
No exclusivity The franchisor puts no restrictions on where each franchisee operates

If you are planning to offer a territory or local marketing area to your future franchisees, you should think about how you will identify these areas. For example, you may want to consider population size and competitor businesses. A higher population size will increase the value of a territory, whereas having strong competitors will lower it.

Bookings

You should take care to have a fair and functional booking system to allow customers to book delivery jobs. Your franchisees will want to know how customers make bookings and how you will guarantee that each franchisee receives a fair distribution of customers.

You may find it more efficient to set up a centralised booking system that you manage. In this case, it will be essential to have a transparent policy on how you pass bookings to franchisees. For example, you would typically have an obligation to send customers who booked inside a territory to the relevant franchisee. When starting out, you may also want to have a policy of referring bookings to the nearest franchisee. This covers instances where customers book from outside the areas you cover.

However, you may want the ability to withhold bookings from a franchisee if you believe they are incapable of fulfilling the booking. To keep these decisions fair, you should refer to objective criteria such as key performance indicators.

You should also consider whether franchisees will be able to generate their booking leads. If not, during pre-contractual negotiations, franchisees may focus on ensuring that you are taking reasonable steps to market the courier service, generate bookings, and pass on a sufficient number of customers to each franchisee.

Vehicles

Courier franchises with strong branding typically use delivery vehicles with a consistent appearance. Therefore, your franchise documents should include requirements for each vehicle, including their:

  • roadworthiness;
  • model;
  • fit-out, such as a particular type of internal storage;
  • cleanliness; and
  • colour and external signage.

You should also consider whether you will require a minimum number of vehicles according to the size of each franchisee’s territory. A minimum number ensures that each franchisee can meet demand.

Vehicle Costs

When putting together your franchise documents, you should map out all expenses related to the vehicles. As stated by the Franchising Code of Conduct, the disclosure document you provide to franchisees must detail all costs relating to purchase and maintenance of vehicles.

Failure to disclose expenses may lead to a dispute if a franchisee feels that you misled them about the actual costs involved in running the courier franchise. Common vehicle costs include:

  • purchasing or leasing;
  • the fit-out, including signage;
  • updating the appearance and fit-out to reflect any changes to the franchise brand;
  • insurance, including comprehensive vehicle cover and courier goods;
  • maintenance and repair; and
  • running expenses.

You should also consider whether you include some of these costs in the initial setup fee. For example, you may offer to include signage as part of the initial setup, but require the franchisee to purchase the vehicle as an additional expense.

Operations Manual

An essential step in developing a new franchise is creating your operations manual. This is a go-to guide that covers, in detail, how franchisees must run the business. A well-drafted operations manual helps ensure that your franchisees follow a consistent and proven system.

For a courier franchise, the operations manual should take care to detail the process for dealing with customer complaints. Surveys have shown that handling of customer complaints (most often arising from delivery delays) is the biggest gripe that consumers have with courier services. Encouraging your franchisees to do their best to resolve customer complaints will help set your franchise apart from competitors.

Laws and Regulations

Your franchise documents should require franchisees to adhere to all road laws, including holding a full driver’s licence. You should also include a condition that if a franchisee commits a serious driving offence while operating the franchise, you have the right to terminate their franchise agreement. To ensure you recruit the right people, you may also wish to inspect a copy of the franchisee’s driving record.

While on the road, the vehicles will be ambassadors for your franchise. Therefore, you may want to require franchisees to notify you of minor road offences committed while driving the courier vehicle. Although a minor offence may not give cause to terminate the franchise agreement, it may indicate that the franchisee needs to improve to meet key performance indicators.

Aside from road laws, you should obtain advice on what other rules and regulations are relevant. For example, occupational health and safety laws may apply to courier delivery services. Above all, your franchise documents should require the franchisee to comply with any relevant laws.

Key Takeaways

Starting a courier franchise offers great potential. However, before you recruit franchisees, ensure you have the important points planned out, including:

  • deciding on territories;
  • creating a booking system and policies;
  • determining vehicle standards and costs;
  • drafting the operations manual; and
  • considering relevant laws.

If you have any questions, contact LegalVision’s franchise lawyers on 1300 544 755 or fill out the form on this page.

Amritha Thiyagarajan
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