In Short
- Start with a strong foundation: Assess the market, consolidate your operations, and create a competitive fee structure to prepare your business for franchising.
- Legal and strategic essentials: Draft a comprehensive franchise agreement, register trade marks, and develop a clear marketing strategy to ensure consistency.
- Recruit and grow wisely: Prepare recruitment materials and set clear criteria for selecting franchisees with relevant experience or skills.
Tips for Businesses
Franchising your retail business requires careful planning and execution. Begin by assessing the market and ensuring your operations are replicable. Protect your brand by registering trade marks and creating a robust franchise agreement. Engage experts, such as franchise lawyers, to help navigate the process, ensuring your business is legally and strategically prepared for growth.
Franchising is an excellent way to expand your business with a comparatively low investment. Almost all business types can use the franchising business model, including retail businesses. This article will take you through seven steps to franchising your retail business in New Zealand.
Assess the Market
The first step to franchising your retail business is to assess the market. More than 18% of all franchises in New Zealand are retail brands, meaning there is fierce competition. However, you can identify your niche in the market by considering what makes existing franchises successful and differentiating your retail business.
Consolidate Your Operations
Consolidating your operations is the next major step you must take after deciding that franchising is feasible. This has two main aspects, being to ensure your business is:
- operating smoothly and turning a profit; and
- capable of being replicated.
You should be able to document each of your processes for future franchisees. This will ensure consistency across the entire franchise network.
Continue reading this article below the formDevelop a Fee Structure
The next step to consider is the fee structure your franchise will utilise. The two main revenue streams for franchises are the:
- initial franchising fees; and
- royalty fees.
The initial franchise fee is what the franchisee pays to have access to your business operations and intellectual property. On the other hand, royalty fees give the franchisee the right to use your brand and systems over a period. Royalty fees usually vary per a percentage of the franchise’s revenue.
Your franchise must be affordable for prospective franchisees but still lucrative for you. Finding this balance can be easier with assistance. Again, you may seek the advice of a franchise lawyer who can assist you.
Prepare a Franchise Agreement
The next essential step for franchising your retail business is to prepare the franchise agreement. This contract will govern your relationship with your franchisee and serve as the foundation for the franchise system.
Some essential items to cover in your franchise agreement include:
- fees and payments;
- term of the agreement and right to renew;
- the requirement to use specific equipment and products for the business. For a retail business, this might include a requirement to use particular CRMs and have the store fit out in a specific way;
- use of intellectual property;
- dispute resolution methods; and
- exit strategies.
Create a Marketing Strategy
Developing your marketing strategy is the next critical step in franchising your retail business. A well-established marketing strategy will ensure consistency across the franchise network. Your marketing strategy should be clearly defined and outlined:
- how to correctly use advertising materials;
- rules relating to social media usage;
- expectations for the franchise network’s contribution to marketing efforts; and
- contributions to a marketing fund.
Register Your Trade Marks
Another critical step of franchising your retail business is to ensure you have registered your trademarks with the Intellectual Property Office of New Zealand (IPONZ). This will help avoid someone from taking advantage of the reputation you have built for your brand. A registered trade mark will assure prospective franchisees that your brand is sufficiently protected from misuse. Additionally, a robust trade mark portfolio will increase the value of your business.
Develop Recruitment Materials
The final step is to prepare to market your business model to potential franchisees. This will require you to develop advertising materials, such as brochures or presentations on the business opportunity.
At this stage, you should develop criteria for assessing prospective franchisees. Additionally, you should include this in your marketing materials. For example, consider franchisees with sufficient experience working in the retail industry. That way, you can be assured that they know the industry’s specific demands. Alternatively, you might want your first franchisees to have business experience previously. Whatever the case, knowing the types of franchisees you are looking for will influence what you include in your marketing materials.
This publication provides you with the fundamentals for franchising your New Zealand business, including set up, branding and management.
Key Takeaways
If you own a retail business and are looking for ways to expand it with minimal investment, consider franchising your retail business. The seven key steps for franchising your retail business include:
- assessing the market;
- consolidating your business operations;
- developing a fee structure;
- preparing a franchise agreement;
- creating a marketing strategy;
- registering your trade marks; and
- recruiting franchisees.
If you need assistance franchising your retail business, our experienced franchise lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0800 005 570 or visit our membership page.
Frequently Asked Questions
A franchise agreement is a contract that establishes the relationship between the franchisor and the franchisee. A franchise argument usually includes standard terms such as fees and payments, the length of the agreement and requirements to use specific suppliers.
To franchise your retail business, you must first assess the market and identify how you will distinguish yourself from competitors. You should then consolidate your business operations and establish an appropriate fee structure. Then, you will need to insert this fee structure into a franchise agreement. Finally, you should create a marketing strategy and register your trademarks before recruiting your first franchisees.
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