UK: Is Your Business Right For Franchising?

1. Business Model. 

Before you franchise your business it is important that you have an existing business model that you have been running successfully.  Only once you have been running it successfully can you expect others to do the same.  

2.       Trade Mark and Goodwill

It is important that your business has an identifiable mark or logo that has been protected by registration as a trade mark and existing goodwill which you licence to your franchisees.

3.       Manual

The most important aspect of a franchise business is uniformity throughout the franchise system.    This is achieved through your manual which must be carefully thought about and written so that it covers all areas of the business.  It will include such items as how the shops or offices are going to be fitted out, any uniforms that staff may have to wear, employees, treatment of clients, stationery, ordering of goods etc.

4.       Territories

Depending on the nature of the business, territories within which your franchisees will trade may be a consideration.  If the business is a stand alone shop then this is not so important but if it is a business that is designed to cover a certain area then territories are important.

5.       Franchise Agreements

It is important that the franchise agreements are properly drawn at the outset.  This will help to minimise any disputes in the future.  The franchise agreement would cover the legal framework within which your franchisees will operate and include items such as the licence to use the trade mark, payment of the franchise fees to you as franchisor, non competition, restrictive covenants which, will be enforceable for up to a year if the restraint is confined to the territory within which the franchisee was operating.    

6.       Recruitment

Thought must be given to how your franchisees are to be recruited and whether they are going to pay you an initial up front fee in order to become a franchisee. 

7.       Training and Support

An important aspect of a franchise and one that attracts many franchisees is the training and support network offered by the franchisor.  It is important therefore that your business model is capable of being taught and ongoing training and support can be given.

8.       How are you to be paid?

It is usual under franchise agreements for the franchisor to be paid a certain percentage of either profit or turnover of the franchise business and so thought must be given to what percentage would be appropriate in the circumstances.