Franchising Your Business

If you have a successful business, franchising can be a very effective way of growing. You use your existing business as a blueprint for expansion. But instead of setting up and running new outlets yourself, you find independent franchisees that you help to set up their own businesses using your blueprint.

The franchisees finance and manage their businesses themselves but pay you fees. Fees are for the right to use your business model, brand and ongoing advice and support throughout the length of the agreement. This may allow your business to grow faster and give a better return on capital than if you own all the outlets yourself  - however, the profit per unit will be significantly less. Some of the best known companies in the country have become household names by franchising their businesses.

This guide outlines the different kinds of franchising, and will help you identify whether it might suit your business. It also explains what you need to do to build a successful franchise operation.
Franchising options

If you have a successful business and are looking to expand, you might want to open additional outlets. Franchising your business can be a very effective way of doing this. Instead of financing and managing the new outlets yourself, you work with independent franchisees.
Business format franchising

With business format franchising, you put together a complete business package. You then licence this format to franchisees. They run their own businesses, but use your methods and trading name.

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      You provide an operations manual, detailing how to set up and manage a new outlet. For more information, see the page in this guide on how to develop your business format.
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      You agree a contract with your franchisee setting out what rights and obligations you each have. For example, you might provide marketing support. For more information, see the page in this guide on the franchise agreement.
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      The franchisee pays you for the right to use your business concept. For more information, see the page in this guide on franchise fees and royalties.
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      You train and support the franchisee through their start-up period. Support could include ongoing marketing, business growth help, regular regional meetings or how to negotiate purchasing contracts.

Other franchising arrangements

There are other business arrangements which are sometimes also referred to as franchising, including:

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      selling a licence allowing someone else to manufacture and sell your product, but without telling them how to run their business
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      using an agent, who sells your product on your behalf
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      setting up a distribution agreement, whereby you sell your products to another business that then sells them to their own customers