Franchise My Business

Can I Franchise My Business?

Your business is doing really well. You have loyal customers who love your product or service. You want to grow your business, but you're not sure what strategy is right for you.

Whether franchising your business is a viable option for you depends on several factors, including whether your business model can be replicated, the strength of your brand, the overall demand for your product or service and the legal requirements to franchise your business.

Before investing in the franchising process, it is important to consider whether your existing business has the foundations needed to support a successful franchise system.

How do I know if my business is ready to franchise?

Franchising is a popular way to grow a business, but it isn't suitable for every business. Developing a franchise system requires a considerable investment of time, effort and capital.

Before franchising your business, there are five key factors you should consider to determine whether your business is ready to franchise.

01 - BRAND

Is your brand ready to franchise?

Do you have a well developed brand?

Branding is essential for any business to stand out and differentiate itself from its competitors.

To develop a strong brand identity you need to understand your target audience, your values and your unique selling proposition.

Most business owners who are considering franchising as a growth model have loyal customers who connect with their brand. But it takes more than loyal customers to successfully franchise.

In franchising, branding is targeted at two separate and distinct markets.

1. Customers

Customers need to understand what your brand represents and receive a consistent experience across the franchise network. Clear guidelines around messaging, tone and visual identity help franchisees deliver that consistency.

2. Prospective Franchisees

The second and often more difficult market is prospective franchisees.

While a strong customer-focused brand will attract prospective franchisees, often marketing to and finding the right franchisees can be challenging. Prospective franchisees are looking at the business model from an entrepreneurial perspective. They need to be convinced not just of your brand's appeal, but also of the potential for profitability and sustainability, as an investment opportunity. 

02 - SYSTEMS

Can your systems be replicated?

Do you have business systems in place that can be easily followed and replicated?

It is important that your key business activities have well-documented processes, procedures and standards. A franchisee needs to be able to learn how to operate the business and consistently reproduce the customer experience that you provide.

Your operating system also needs to be scalable. The processes that work in your existing business need to be capable of being replicated across multiple franchise locations without becoming unnecessarily complex.

Can someone else learn to operate your business?

Consider how difficult it would be for a new franchisee to operate the business. Do they need particular qualifications or experience? Will you need to develop specialised training? How long will it take before they can operate the business competently?

Can you maintain consistency across the franchise network?

Training is not simply about teaching franchisees your processes and procedures. Franchisees also need to understand why your standards matter and how consistency protects the value of the brand across the franchise network.

03 - QUALITY

Can you maintain quality across the network?

Does your business have quality standards?

By implementing quality standards, you can establish specific criteria for everything from customer service to product offerings. As a result, customers will be able to expect the same level of quality no matter which franchise they visit.

For product-based businesses (including retail food)

Consider whether you will supply to franchisees or require them to purchase from approved suppliers. Your supply arrangements need to be capable of supporting a larger network of outlets.

For service-based businesses 

Consider how franchisees and their staff will be trained to provide the services in the same way that your business does.

Maintaining quality across a franchise network ultimately depends on a combination of franchisee selection, training, ongoing support and effective compliance systems.

04 - DEMAND

Is there sustainable demand for your business?

Will the demand for your product or service continue to grow?

There is no guarantee that the initial demand for a product or a brand will be sustained. Markets are constantly evolving. Change is happening more rapidly now than ever before, partly due to increasing technological advancements.

Consider your target market, your unique selling proposition and how your business is positioned against existing and emerging competitors.

A franchise system needs to be capable of adapting as customer preference, technology and competition change. The strength of the opportunity should be assessed not only by how the business is performing today, but whether there is likely to be sufficient demand to support a growing franchise network.

05 - FEASIBILITY

Does the franchise model work financially?

Will your franchise model generate sufficient returns for both you and your franchisees?

If you franchise your business, you must consider whether the business is going to work for both you and your franchisees, taking into account the demand for your product or service, ongoing franchise fees and the purchase of goods or services from third parties.

For the franchisee 

Prepare a forecast to determine if the business is viable. Consider whether the business can generate sufficient revenue to meet its operating costs, franchise fees and other expenses while providing an appropriate return to the franchisee.

For the franchisor 

Consider whether the fees and revenue generated by the franchise network can support the cost of providing training, support, compliance, administration and other services to franchisees.

Financial modelling can help assess the feasibility of your proposed franchise model. Get your accountant or financial adviser to assist you with this process.

THE FRANCHISING PROCESS

What are the steps involved in franchising my business?

Franchising a business involves developing the commercial, operational and legal framework that will allow other people to operate businesses using your brand and systems. While every business is different, there are six key stages involved in developing a franchise system.

01 - ASSESS

Assess whether your business is ready to franchise

Before investing in the development of a franchise system, consider whether your existing business has the foundations needed to support franchising.

This includes assessing your brand, systems, quality controls, market demand and whether the proposed franchise model is financially viable for both the franchisor and prospective franchisees.

↑ REVIEW THE FIVE FRANCHISE READINESS FACTORS

02 - PROTECT

Protect your brand and register your trade mark

You may already have registered a trade mark as part of establishing and growing your business. If you have not, protecting your trade mark should be prioritised early in the franchising process.

A trade mark serves as a unique identifier for your brand, protecting your business name, logo, and other distinguishing features from being used by others (in your trade marked category).

Failing to secure a registered trade mark could lead to significant legal and operational challenges. For instance, you may wish to grant a franchise in a specific location, but find yourself unable to do so because someone else is already operating a business under your name, or a similar name in that area (think Burger King vs Hungry Jacks). This can create confusion in the marketplace and potentially damage your brand's reputation. Additionally, it could lead to legal disputes over trade mark infringement, which can be costly and time-consuming to resolve.

By registering your trade mark early, you ensure that your brand is protected and that you have the exclusive right to use the trade mark to expand your franchise system.

Need help protecting your brand? - Trade Mark Registration →

03 - DEVELOP

Develop your franchise business model

Franchise fees and commercial structure 

During this stage you will develop the franchise fee structure, including initial upfront fees, ongoing royalties, ongoing advertising fees and other financial arrangements.

It's important that you get advice and assistance from franchise professionals (such as franchise consultants, accountants and franchise lawyers) to develop an effective model and fee structure.

If fees are too high, then franchisees may not be able to achieve an acceptable return on investment. Conversely, if fees are too low, you might not generate enough income to grow the franchise and invest in advertising and marketing.

You should also establish guidelines for territory allocation (if any), training, marketing support and operational standards.

Explore our Franchise Consulting Services →

Supplier Arrangements

Consider whether franchisees will be required to purchase particular products, equipment or services and whether existing suppliers can support a larger and geographically dispersed franchise network.

In retail food franchises it is imperative that suppliers have the capacity to supply an increased number of sites. Remember that franchisees will quickly become frustrated if they are not able to maintain inventory. Additionally, you want to ensure brand consistency.

If it is proposed that sites be opened in new locations, you may need to establish new relationships with local suppliers.

Shop fitters and equipment suppliers are additionally important for site-based franchises. One of the foundations of franchising is that each location looks and feels the same.

Other supply relationships must also be explored, such as software partners and uniform providers.

Marketing and Brand Management

Marketing support is another important element of a franchise network. Franchisees should have access to professionally designed marketing materials, such as brochures, menus and digital templates, to promote their business effectively.

It is important that you develop marketing guidelines to maintain brand consistency.

One of the decisions you will need to make is how much marketing you as the franchisor will undertake for the brand, and how much marketing the franchisees will undertake for the brand. For example, will franchisees manage their own local social media pages, or will social media be undertaken by you on a franchise-wide basis.

04 - DOCUMENT

Prepare the documents needed to start franchising

Before you begin granting franchises, you will need to prepare documents that both establish how the franchise relationship will operate and provide prospective franchisees with the information and documents required by the Franchising Code of Conduct.

The two main documents provided to a franchisee in the franchising process are a franchise agreement and a disclosure document (for more information about the documents that must be provided to a franchisee before they enter into a franchise agreement see our article here).

Franchise Agreement

A well drafted franchise agreement will reflect your business model and will clearly set out the rights and obligations of both you and the franchisee.

A franchise agreement must comply with the Franchising Code, but must also comply with the unfair contracts regime under the Australian Consumer Law.

Disclosure Document

In addition to the franchise agreement, you must also develop a disclosure document that complies with the Franchising Code. The disclosure document should contain information that a prospective franchisee needs in order to make an informed decision on whether to buy a franchise.

In addition to the franchise agreement and the disclosure document, the other documents you may need to prepare are a confidentiality agreement (or NDA), an intellectual property licence and a premises licence.

It is important that you seek advice from an experienced franchise lawyer to develop these documents. Franchising is complex and a number of laws and regulations govern the franchise industry.

Learn about our Franchise Development Services →

05 - SYSTEMISE

Develop your franchise systems, training and support

A franchise system needs to be capable of being taught, replicated and supported. Before appointing franchisees, consider how you will document the way the business operates, train new franchisees and provide support as the network grows.

Operations Manual

Document the systems, procedures and standards franchisees need to follow.

Most training materials and operations manuals are now delivered online, which means that you can continue to develop your training materials and operations manuals as the franchise system matures.

Training

Developing comprehensive training programs that cover all aspects of the business from operations to marketing will help franchisees feel confident and equipped to run their own franchise business. 

Ongoing Support

Ongoing support should also be provided to franchisees, whether through regular check-ins or meetings to address any questions or concerns that franchisees may have.

Establish clear communication channels and processes to ensure that information flows smoothly between you and your franchisees.

Effective communication processes help maintain consistency and adherence to the franchise system and standards.

06 - LAUNCH

Select suitable franchisees and start franchising

Develop Franchisee Selection Criteria

In our experience, people sometimes franchise their business because they have a well-known brand and people have approached them to "buy a franchise".

Prior to granting a franchise, it is important that you identify the qualities, skills and experience that you are seeking in potential franchisees.

A franchisee that lacks skills, capital or commitment can cause a franchise business to fail and damage a franchise system's reputation.

Remember that you don't need to accept every application.

Generally, a franchisee application form will be prepared as part of your franchise document package. This form will provide you with information about a prospective franchisee, including qualifications, experience and financial standing.

Plan how your franchise network will grow

Consider the pace and scalability of growth, ensuring that infrastructure, resources, and support systems are in place to accommodate planned growth.

If you have a good or service which is unique or new to the market (and given that infrastructure and resources are in place), you may aim for fast growth in order to capitalise on being first to the market.

If fast growth is not the best strategy for your business, you may choose more steady growth, possibly opening a number of corporate sites to generate cash flow.

What are the legal requirements for franchising a business in Australia?

It is important that you understand your legal obligations in operating a franchise system. In addition to an obligation to provide a prospective franchisee with franchise documents that comply with its requirements, the Franchising Code sets out a number of ongoing obligations. These include obligations related to specific purpose funds, obligations for ongoing disclosure, obligations related to significant capital expenditure, and the obligation to act in good faith.

If you do not comply with your obligations under the Franchising Code, you may be subject to substantial penalties.

Further, as a franchisor, you may also be liable for penalties arising from a failure by franchisees to comply with workplace laws.

HOW WE CAN HELP

Helping you build the right foundations for your franchise

From assessing whether your business is ready to franchise to developing your franchise model, preparing your franchise documents and supporting your network as it grows, we can help at each stage of the franchising process.

READY TO EXPLORE FRANCHISING?

Talk to us about franchising your business

Whether you're still deciding if your business is ready to franchise or you're ready to begin developing your franchise system, we can help you work out the next steps.

Or learn more about our franchise development services →