10 Steps to Starting a Franchise

Summarise with: ChatGPT Perplexity Microsoft Copilot

---

Table of Contents

• 1. Create a Solid Business Model
• 2. Do Your Market Research
• 3. Speak to the Experts
• 4. Prioritise Recruitment 
• 5. Implement Training Standards 
• 6. Plan to Succeed 
• 7. Decide on Fees 
• 8. Protect Your Intellectual Property
• 9. Develop Your Operations Manual
• 10. Create Your Franchise Documents
• Key Takeaways

Franchising can be an overwhelming and long process. Taking the time to plan your franchise structure can make a significant difference in the success of your franchise. This article will outline the ten key steps to starting a franchise.  

1. Create a Solid Business Model

Before starting a franchise, you should have an existing business that you want to scale up. With an existing business model, it is easier to demonstrate your business’ success by showing that you have a proven formula for your business model.

When deciding on a business model for your franchise, some of the key factors to consider include:

• your long-term vision for the franchise, such as how many franchises you may want;
• the target audience or customers for your products or services;
• the potential locations you want the franchises to operate from; and
• the costs of operating a business that is substantially the same as yours.

Creating a business model on well-informed research specific to your business will ensure the longevity of your franchise and encourage others to become franchisees of your business.

2. Do Your Market Research

Whether expanding your business as a franchise or bringing franchises to Australia, consider the industry you will be operating in. An essential part of this consideration involves thinking about:

• who your competitors are; 
• whether there are similar franchises and what your point of difference is;
• which laws are likely to apply to your franchise; and
• how you could ensure compliance with the Franchising Code which governs franchises in Australia.

3. Speak to the Experts

It is important to consult professionals when starting a franchise. As all franchise models will have their own considerations, documents and costs involved in operating them, speaking with experts can help you establish what you need for your franchise model. For example, the costs and required documents for a mobile dog-washing business will differ greatly from those of an Italian restaurant franchise business.

4. Prioritise Recruitment 

It is essential to prioritise the recruitment of franchisees that will carry forward your goals and vision as a franchisor. The actions of your franchisees can impact the franchise network’s reputation, whether negative or positive. Therefore, building trust and mutual respect between you and your franchisees is essential. When recruiting franchisees, ensure they are a right fit for the business and seem eager to work with your brand. 

5. Implement Training Standards 

Equipping your franchisees with the skills, training, and knowledge required for business operations is important. One of the core purposes of franchising is sharing knowledge and replicating a successful business system.

You must also ensure that you are committed to your franchisees’ continued training and development, with a readiness to provide them with training, operations manuals and other materials to ensure the franchisee knows how to operate the franchised business.

6. Plan to Succeed 

You also need a long-term plan and goals that maintain high and consistent standards throughout your network. This will ensure you have the best possible product or service for your customers being provided by the best and most satisfied franchisees. 

Questions to consider in this plan include:

• whether you will be offering franchisees exclusive territories;
• marketing rules for the franchise network and if you will be operating a marketing fund;
• the level of ongoing support provided by you to your franchisees; 
• what the minimum requirements franchisees will need to meet before and during the operation of the business; and 
• whether the franchisees need to obtain any licences or permits to operate.

The considerations you will make for your business will depend on the nature of your franchise network.

7. Decide on Fees 

Profitability is one of the most important short and long-term goals in any franchising network. A primary aspect of fostering profitability with your franchisees is ensuring that the fees you charge them are reasonable. 

You should consider two main types of fees in your franchise offering.

8. Protect Your Intellectual Property

A crucial aspect to consider before starting a franchise is protecting your business’ intellectual property. Failure to protect your IP could result in your inability to license the IP to your franchisees, which forms the core aspect of franchising. As such, you should first consider the IP relevant to your franchise and undertake certain steps to protect your IP. Some key ways to protect your IP include:

• registering your trade marks;
• legally drafting your documents with appropriate non-disclosure and restraints clauses; and
• structuring your company to have a holding company or IP entity that will hold all of your IP.

9. Develop Your Operations Manual

The operations manual is the primary guide for the franchisees to understand how to run the franchise. It should cover everything from how your franchisees interact with customers to the format in which franchisees provide you with regular reports. 

Given the highly detailed nature of the operations manual, it will often contain confidential information. As such, it is usual only to provide an operations manual after the franchisee enters the franchise agreement or signs a document agreeing to not disclose the manual’s contents, like a non-disclosure agreement.

10. Create Your Franchise Documents

Finally, you will need to develop your legal documents before starting a franchise. At a minimum, your franchise documents will include a franchise agreement, disclosure document and key facts sheet. However, depending on the nature of your franchise system, you may also require:

• a licence to occupy;
• step-in-deeds;
• non-compete deeds; and 
• personal guarantees. 

The documents are essential to your compliance with the Franchising Code of Conduct (the Code). Failing to comply with the Code concerning your franchise documents can result in significant fines. Ensure you take the time to consult with franchise lawyers. Notably, the Code and its specific rules highly regulate franchising and apply to what you can and cannot include in your documents. 

Franchisor Toolkit: How to Franchise Successfully

Franchising your business? This free guide will guide you through key strategies, legal essentials, and tips for successful growth.

Download Now

Key Takeaways

One of the primary reasons franchisees buy into franchises is to operate a business with a proven system for opening a profitable business. As such, before franchising your business, you should ensure that everything is planned and in place to allow the franchisees to operate turnkey business operations. In this respect, research and planning will give you the best prospect of success. There are also several key steps to follow when starting a franchise, in particular:

1. create a solid business plan;
2. do your market research;
3. speak to the experts;
4. prioritise recruitment;
5. implement training standards;
6. plan to succeed;
7. decide on feeds;
8. protect your intellectual property;
9. develop your operations manual; and
10. create your franchise documents.

If you need assistance establishing a franchise system, 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.