How to start a franchise

Starting a franchise can be a complex process, but with careful planning and execution, it can also be incredibly rewarding. This in-depth guide will walk you through each step of starting a franchise, from assessing your business readiness to providing ongoing support to your franchisees.

1. Assess Your Business

Before diving into franchising, it's essential to assess whether your business is ready for this expansion model. Consider the following:

• Profitability: Ensure that your business is profitable and has a proven track record of success. Franchising a struggling business can lead to challenges down the line.
• Uniqueness: Evaluate what sets your business apart from competitors. A unique selling proposition (USP) can attract potential franchisees who see value in your brand.
• Scalability: Determine if your business model is easily replicable in different locations and markets. Franchising requires scalability to expand effectively.

Can you replicate your business model in another area? – if so a franchise model may be able to work for you as a franchise can replicate your business elsewhere.

2. Develop Franchise Documents

Once you've determined that your business is ready for franchising, you'll need to create essential franchise documents:

• Franchise Disclosure Document (FDD): The FDD provides prospective franchisees with detailed information about your franchise opportunity, including franchise fees, royalties, territory rights, and other important terms and conditions.
• Franchise Agreement: This legal document outlines the rights and responsibilities of both the franchisor and the franchisee. It covers aspects such as training, support, territory, trademarks, and termination clauses.

3. Protect Intellectual Property

Protecting your intellectual property (IP) is crucial before franchising your business:

• Trademark Registration: Secure trademarks for your brand name, logo, slogans, and other distinctive elements. This protects your brand identity and prevents others from using your trademarks without permission.
• Copyrights and designs: Make sure you have evidence of any original materials you have created, such as training manuals or marketing materials, including how, when and where you came up with them
• Patent Registration: Secure patent protection for any inventions, unique products or processes within your business. This protects your inventions prevents others from using them without permission.

4. Establish Franchise Fees and Royalties

Determine the financial aspects of your franchise model:

• Initial Franchise Fee: Decide on an initial fee that franchisees will pay to join your franchise network. This fee should cover the cost of onboarding and initial support.
• Royalties: Establish ongoing royalties, typically calculated as a percentage of sales, that franchisees will pay to the franchisor. This provides a steady stream of income and helps cover ongoing support and brand development costs.

5. Develop Training Programs

Create comprehensive training programs to ensure franchisees are equipped with the knowledge and skills needed to succeed:

• Operations Training: Provide training on day-to-day operations, including product/service offerings, inventory management, and customer service. Marketing and Sales Training: Teach franchisees how to effectively market their businesses and drive sales. Provide guidance on branding, advertising, and promotional strategies.
• Compliance and Quality Control: Train franchisees on adhering to brand standards, maintaining quality, and complying with legal and regulatory requirements.

6. Provide Operational Support

Offer ongoing support to franchisees to help them navigate the challenges of running their businesses:

• Site Selection and Buildout: Assist franchisees in selecting suitable locations for their businesses and guide them through the buildout process.
• Supply Chain Management: Help franchisees establish relationships with suppliers and manage inventory effectively. Marketing and Advertising: Provide marketing support, including access to marketing materials, advertising campaigns, and digital marketing strategies.
• Financial and Administrative Support: Offer guidance on financial management, accounting practices, and administrative procedures.

7. Recruit Franchisees

Attracting the right franchisees is crucial to the success of your franchise network:

• Develop a Franchise Marketing Plan: Identify target markets and develop marketing strategies to attract potential franchisees. Utilize various channels, such as franchise expos, trade publications, and online platforms, to promote your franchise opportunity.
• Screen and Select Candidates: Screen potential franchisees based on their qualifications, experience, financial resources, and alignment with your brand values. Conduct thorough interviews and background checks to ensure the right fit.

8. Pilot Franchise Units

Before launching on a larger scale, test your franchise concept with pilot units:

• Select Pilot Locations: Choose a few locations to serve as pilot units, ideally in different markets to assess scalability and market viability.
• Gather Feedback: Collect feedback from pilot franchisees, customers, and staff to identify strengths, weaknesses, and areas for improvement.
• Refine Operations: Use the pilot phase to refine operational processes, marketing strategies, and training programs based on real-world experience.

9. Comply with Legal Requirements

Ensure compliance with all legal requirements and regulations governing franchising:

• Franchise Disclosure Laws: Familiarise yourself laws and regulations. Ensure that your FDD complies with all legal requirements and is registered where necessary.
• Consult Legal Experts: Seek guidance from franchise lawyers through FSB’s Legal advice line and the FSB Legal and Business hub. They can help you navigate legal complexities and ensure compliance.

10. Launch and Support Franchisees

Once you've recruited franchisees, provide them with the support they need to succeed:

• Launch Support: Assist franchisees with the launch of their businesses, including grand openings, marketing campaigns, and initial training.
• Ongoing Support: Provide continuous support to franchisees through regular communication, training programs, marketing initiatives, and operational guidance.
• Monitor Performance: Monitor the performance of franchise units, identify areas for improvement, and implement strategies to drive growth and profitability.

11. Continuously Evaluate and Improve

Regularly evaluate the performance of your franchise network and make adjustments as needed:

• Performance Metrics: Establish key performance indicators (KPIs) to measure the success of franchise units, such as sales growth, profitability, customer satisfaction, and brand compliance.
• Feedback Mechanisms: Solicit feedback from franchisees, customers, and staff to identify areas for improvement and address any issues promptly.
• Adapt to Market Changes: Stay informed about market trends, consumer preferences, and industry developments. Adapt your franchise model accordingly to remain competitive and meet evolving customer demands.

Starting a franchise requires careful planning, execution, and ongoing commitment to support franchisees and drive growth. By following this in-depth guide and investing in the success of your franchise network, you can build a thriving and profitable franchise business.