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Turning your business into a franchise is a great way to expand your business. However, it should be unsurprising that franchising comes with its own rules. Therefore, business owners often do not know where to begin or whether their business will succeed under a franchise system. This article will outline some questions you can ask yourself to ensure you run a successful franchise.

Is my business unique?

There are a lot of businesses that offer a wide range of products and services. It would help if you started by determining what makes your business better than others. 

Identifying your niche is an essential step in the early stages of creating a business and the initial investment of franchising. 

[cb] For example, you might ask yourself why the world needs your business. 

Is my brand recognisable?

It is not crucial to begin the expansion process with an already recognisable brand. However, it is a good idea to be actively building and protecting your brand over time. Branding includes things like your: 

  • name; 
  • logo
  • process; 
  • services; or 
  • product. 

Before franchising, you should spend time and money making your brand recognisable and unique in the marketplace. 

In particular, registering your business name and logo as trademarks may be a good idea to help protect your brand.

[cb] Registering trademarks gives you intellectual property rights over your unique name, logo, products and slogans. Furthermore, this registration prevents other businesses from copying your brand’s distinguishing features. 

You should set up protection for your intellectual property (IP) before you allow franchisees to start using your branding. 

Is my business replicable?

For a business to become a franchise, you must consider how easy it is to replicate the existing business model. So, it would help if you considered how your business runs daily and implemented systems that franchisees can quickly adopt. Additionally, you should consider: 

  • how customers can make inquiries; 
  • how franchisees will order stock or supplies; 
  • the types of services or goods which you can sell; and 
  • how they will be sold or provided. 

Streamlining these processes helps make a business replicable, which ensures you set up your franchisees for success.

How am I marketing my business?

Marketing is essential in ensuring the success of any business. If you are expanding your business into a franchise, consider that it will only be effective if people know your franchise. This is important because you will need to sell franchises that will in turn, sell goods or services to your customers. You should ask yourself:

  • Have you put your business in a community that needs or would enjoy your business? 
  • Are you investing enough time and money into advertising over social media?
  • What other methods might you consider for advertising?

Consider the best way to attract the demographic you want. Indeed, a successful franchise network needs customers. To get customers, you will need to invest in good advertising. 

Who is right for my business?

Choosing the right franchisees is critical to the success of your business. When you franchise, you hand over a lot of responsibility to your franchisees, including the franchise’s branding and reputation. 

Remember that franchisees must maintain the daily operation and procedures of your business. As such, you should select franchisees representing your business well and maintaining the expected quality and standards. Furthermore, you should draft your franchise agreement to include these expectations from the beginning. 

Am I a supportive franchisor?

Consider how you will facilitate and support franchisees in your franchise network. It is important to remember that a successful franchise will create success for you and, therefore, the rest of the franchise network. Some key considerations you should make to become an effective franchisor might include:

  • regularly reviewing franchisees and their franchises;
  • providing adequate and regular training and support;
  • coherent and comprehensive resources;
  • regularly reviewing and updating your Operations Manual to ensure it helps explain the procedures and process of the business; and
  • regularly check in with your franchisees to ensure they feel heard. 

Are my customers coming back?

A good franchise considers critical methods to keep their customers coming back. First, consider methods such as: 

  • referral systems; 
  • reward points; and 
  • specials. 

Consider the community in each of your franchisees’ locations and help your franchisees to get involved! 

Am I compliant with all the necessary legal obligations?

As a franchisor, you must follow the Franchising Code of Conduct (the Code) and provide several key documents. Notably, you must have a franchise agreement and disclosure document. 

[cb] There are severe penalties for disobeying any obligations set out in the Code. You can receive a fine of up to $10 million for corporate bodies. 

Some of the obligations under the Code include the following:

  • good faith – where you must act honestly and reasonably towards franchisees at every stage of the relationship;
  • onboarding franchisees – the Code requires you to onboard franchisees in specific ways and to provide documents within particular timeframes;
  • financial disclosure and auditing obligations – you must provide certain financial information and audit certain accounts, where applicable;
  • maintain your Disclosure Document – every financial year, you must update your disclosure document to provide franchisees with up-to-date information on the franchise network;
  • dispute resolution – if a dispute arises with your franchisee, the Code sets out how you should handle the dispute. 

The Code outlines many guidelines and legal requirements. Therefore, a good franchisor will ensure they meet their annual deadlines and fulfil their obligations.

The Ultimate Guide to Setting Up a Franchise

Making the decision to franchise your business can be difficult. This Franchisor Toolkit covers all the essential topics you need to know about franchising your business.

This Toolkit also contains case studies from leading franchisors including leading Australian franchises including Just Cuts, FlipOut and Fibonacci Coffee.

Download Now

Key Takeaways

A successful franchise network comprises many different components. As you contemplate becoming a franchisor, you might consider whether you have invested enough time and money into marketing, building, and protecting your brand. You should also ensure your business is replicable and determine if you have the time and resources to train and support your franchisees. Most importantly, you must follow additional legal obligations once you become a franchisor. So it would help if you considered speaking to a lawyer to avoid breaching the Code’s requirements. 

If you need assistance drafting your franchise agreement, our experienced franchise lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 1800 534 315 or visit our membership page.

Frequently Asked Questions

Where do I look to understand all my legal obligations?

The Franchising Code of Conduct is the most important place to look for any legal requirements or guidelines you must follow.

What are some key factors for having a good franchise?

Many key factors contribute to having a successful franchise. For instance, some factors include having a strong brand, good franchisees, supportive franchisors, good legal compliance, good customer retention and effective marketing. 

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