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As a successful business owner, you may be considering the best methods for further growth and future profitability. Franchising your business is one method you may use to achieve these goals. This article will provide you with some background and explain how you can turn your business into a successful franchise.

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What is a Franchise?

Firstly, if you want to expand your existing business, consider turning your commercial operation into a franchise. Certainly, if your business is particularly successful in its format or operating system, you can use this to spread your company across new locations and markets. Above all, expanding your business will allow you to develop your existing operation into a franchise. As a franchisor, you will grant interested parties (franchisees) the right to operate copies of your business in new geographic areas. Your franchisees will run the same business system under the same name. However, they will usually own the local installation of the business itself. 

For example, there are many installations of the McDonald’s franchise across New Zealand. Although each instalment uses the same branding and business practices, local business people will usually own and operate each business carrying the McDonald’s name.

As a franchisor, you will offer franchisees the support and resources necessary to run successful copies of your initial business. In return, franchisees run businesses carrying your brand name and will pay you various royalties or fees.

What Are the Benefits of Franchising?

The franchising process is a great way to grow your opportunities as a business and expand your customer reach. There are various benefits to turning your company into a franchised business. However, one of the main benefits includes the ability to contribute to the growth of your business through multiple operations. Likewise, you can take advantage of your franchisees’ capital and labour with a franchise business. Additionally, you can transfer some of the risks typically associated with expanding your business. Doing this provides you with a greater ability to grow your business across the country and beyond in locations you may not have had access to before. Furthermore, some other benefits of franchising include:

  • the freedom to focus on your core business model rather than the day to day runnings of the business;
  • time to invest in the overall franchise itself;
  • the ability to determine what systems and ideas are effective for your franchise;
  • franchisees that are as committed to the franchise’s growth as you are; and
  • increasing the reach of your goods and services.

Is My Business Ready For Franchising?

The franchising process is an excellent method for expanding your business. However, if your business is not ready for franchising, you risk investing valuable time and effort into a practice that may not be particularly beneficial.

Firstly, before you consider franchising, you must have already established a successful business. Additionally, your business must have identifiable factors that contribute to its success. Potential franchisees can replicate these factors within their own business, including: 

  • recognisable branding with a strong market reputation;
  • unique processes within your business;
  • your different delivery or manufacturing services;
  • popular products suitable for market spread; or
  • distinctive customer service.

The best way to determine whether your business is suitable for a franchise model is to conduct independent research and seek tailored advice. 

For instance, the Franchise Association of New Zealand (FANZ) is one valuable source of franchise-specific information in New Zealand.

Additionally, a franchise specialist can assess your business to provide tailored advice. These specialists can include:

  • consultants;
  • lawyers;
  • advisors;
  • accountants; or
  • other professional roles.

However, before seeking specialist advice ensure that you look for experienced practitioners with good reviews.

How Do I Turn My Business Into a Franchise?

Once you have determined that your business is ready, you can begin preparing it for the franchising process. At this point, any research that you have already done or specialist advice you have received will aid you immensely. They should help you in determining:

  • what legal documentation you will need for your franchise;
  • the exact rights you will grant your franchisees and how to prepare those rights;
  • what modifications and tweaks your business systems will need for replication;
  • how you can develop franchise operation manuals and other resources;
  • the kind of training you will need to give your franchisees;
  • what makes your franchise profitable and desirable for franchisees;
  • the kind of franchisees you want;
  • the best ways to find franchisees;
  • the breadth of your budget; and
  • how you can set up your pilot operation.

A pilot operation is a test operation that determines whether starting a successful franchised business is achievable. Future franchisees may refer to this test later on. Additionally, you will need proper legal documentation, including a franchise agreement and a franchise disclosure document.

Key Takeaways

In short, franchising is not a process you should consider lightly, despite its many benefits. Converting your business into a franchise requires proper research and preparation. Therefore, you should seek experienced specialists to assist you with this process.

If you need help turning your business into a franchise, our experienced franchising 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

How do I turn my business into a franchise?

Turning your business into a franchise requires adequate research and preparation. You will need to draft appropriate legal documentation and find tailored advice to suit your needs.

What is the difference between a franchisor and a franchisee?

A franchisor is an entity that deals with the overall franchise system. On the other hand, franchisees are the individuals or companies that manage separate installations of the franchise in different locations

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