Eight steps to starting a franchise

Male Sales Assistant Working On Laptop Behind Sales Desk Of Florists Store

While setting up your own franchise can seem overwhelming at first, the franchise model can bring significant opportunities for growth, especially in Australia. This article outlines eight steps to start a franchise on the right foot by commercial law firm, LegalVision. LegalVision’s franchise lawyers have assisting hundreds of franchisees and franchisors, including Just Cuts, Fibonacci Coffee and ProfessioNAIL. Register for our free May webinar on how to set up a franchise network.

1. Build a solid business model

Ideally, you should have an existing business that you want to expand into a franchise. It can be harder to sell a franchise model to potential franchisees if you cannot point to an existing business. It is easier to show that you have a proven formula when you already have a profitable business.

2. Do your research

Consider the industry your franchise will be operating in. You should think about:

  • who your competitors are:
  • whether there are similar franchises already; and
  • which laws are likely to apply to your franchises.

A strong understanding of the market will allow you to pre-empt any potential issues and adapt your model accordingly. Additionally, speak with franchise lawyers and accounting and business experts for advice on what will work best for your franchise.

3. Prioritise recruitment

Take your time to develop a strategy for recruiting and assessing potential franchisees. First, consider what your ideal franchisee looks like, where you will find them and how you will attract them. Then, bring franchisees on board who are committed to your vision and high standards.

4. Implement training standards

Create training materials that give your franchisees the knowledge they need for success. For example, is there specialised equipment that your franchisees will be operating, or a particular recipe to be followed? Include these in your training materials.

5. Plan to succeed

Consider what you want your franchise system to look like. Then, reflect on what you can offer franchisees and what you expect of them in return. This will help you maintain high standards throughout your network and provide your customers the best possible product or service.

6. Decide on fees

You want your franchises to be profitable. This will encourage growth and draw other franchisees to your network. A crucial part of fostering this profitability is ensuring that the initial and ongoing fees you charge franchisees are reasonable.

7. Protect your Intellectual Property (IP)

Consider registering each type of IP relevant to your franchise. Register your logo as a trade mark and register your business name. Then, you can give franchisees a licence to use your IP for as long as they are franchisees.

8. Get your franchise documents drafted

You will need to prepare a franchise agreement and a disclosure document at a minimum. You can also require franchisees to sign other documents, including:

  • property licences;
  • confidentiality agreements;
  • non-compete deeds; and
  • personal guarantees.

You should also create an operations manual, a go-to guide that shows your franchisees exactly how to run their business.

Do not take shortcuts when it comes to your legal documents. Instead, you should take the time to consult with franchising lawyers. Franchising is a highly regulated area in Australia, with rules about what you can, and cannot, include in your franchise agreement.

Key takeaways

Franchisees buy into franchises to follow a proven system for running a profitable business. Therefore, before turning your business into a franchise, ensure you have everything in place to allow your franchisees to run a successful operation. Research and planning give your franchise the best chance of success.

If you have any questions about starting a franchise, LegalVision’s specialist franchise lawyers can assist. Become a member and you will have unlimited access to lawyers to answer your questions and draft all the necessary franchise documents to get your franchise off the ground. Call LegalVision today on 1300 544 755 or visit our membership page. You can also register for our free May webinar on how to set up a franchise network or download our free Franchisor Toolkit.