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With people getting back into their pre-COVID-19 routines, social and business events are becoming much more regular. As a result, there has been an increase in the demand for social catering. Therefore, if you already run a catering service and are looking for effective expansion methods, franchising may be an excellent option!

This article will explore the option of starting a catering franchise and the most effective ways to do so.

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Is Franchising Right For You?

Before entering into franchise agreements or recruiting franchisees, you must determine whether a franchise model will suit your existing business. It would help to consider your long-term goals and where you want to lead your catering company. Moreover, you should consider whether franchisees could adopt your current systems. For example, if you decide on menus for events on a whim, franchisees may struggle to create equally great menus that fit your business’s image. 

Likewise, you must ensure you have sufficient capital to invest in franchising. If not, you can consider raising capital from:

Lastly, it would help if you had an existing reputation in the market that is strong and positive. Potential franchisees will need to see if they can earn a return on investment by copying your business model and systems. Moreover, they may want to see a potential client base creating a necessity for market research. Such elements will help your catering franchise opportunity attract many potential franchisees and increase your scope of expansion. 

Franchise Agreement

The franchise agreement will govern the relationship between you and your franchisee. Furthermore, it will outline some key: 

  • rights; 
  • responsibilities; and 
  • information about your franchise. 

Moreover, you must detail how you want your franchisee to run the franchise and what procedures your franchisees should use. Additionally, your agreement might also include:

  • franchise territory;
  • franchise systems;
  • grant of rights;
  • property lease;
  • renewal clause;
  • franchise fees; and
  • approved suppliers.

Franchise Disclosure Document

This document will outline critical facts about your franchise to ensure your franchisee can make an informed decision. It is not compulsory to have it unless you are a part of the Franchise Association of New Zealand (FANZ). However, even if you are not a member of FANZ, it is still beneficial to have a disclosure document. 

Further, your document can detail:

  • your business model;
  • cooling-off period;
  • dispute resolution methods;
  • estimated start-up costs;
  • financial projections;
  • intellectual-property; and
  • consequences of not paying franchise fees.

Operations Manual

Your catering franchise may come with many systems and equipment, from industrial ovens to transportation. It is best to draft an operations manual to ensure consistency across your brand. This will guide your franchisee on how best to use your systems. Furthermore, it allows franchisees to communicate the same information with their staff. You will often only need to provide this document to your franchisees after signing the franchise agreement. 

Your manual can include:

  • your goals;
  • food requirements;
  • suppliers and inventory guide;
  • food standards; and
  • marketing and promotional tips.

Training and Mentoring 

Running a catering franchise may require your staff to have specific technical skills such as patisserie skills to good customer service. Although your franchisee may have the basic knowledge necessary, they may lack the experience to handle everything. Therefore, offering training and coaching opportunities to your staff is critical to the success of your franchise. Further, you can ensure your franchise will succeed if the franchisee can apply their new skills. Training may cover:

  • management;
  • sales;
  • marketing;
  • menu planning; or
  • setting up for events.

For highly technical skills (such as cooking) ensure your franchisees hire chefs with the correct qualifications and experience. However, your franchisee should also know about general food standards and safety laws.

Leases

It is likely your franchises will be based in several locations. Unless you plan to buy properties, you must enter a lease agreement with a landlord. However, there are a couple of ways to execute this.

Firstly, you can choose to hold the lease yourself, meaning you will be directly responsible for rent and outgoings. To ensure your franchisee pays the rent, you must inform them of this duty in their agreement. 

Secondly, you can allow the franchisee to hold the lease so they will be responsible for communicating with the landlord. However, this can give you less control over the property, and you will have no relation with the landlord. If your franchisee decides to leave the franchise early, transferring the property to the new franchisee will need to be approved by the landlord first. 

Lastly, you can initially hold the lease and transfer it to your franchisee with your landlord’s consent. Additionally, you can transfer a lease through a deed of assignment. 

Key Takeaways

When franchising your catering business, there are some considerations you should first make. Firstly, determine if a franchise model will suit your existing business. Your systems and procedures should be easy to replicate, and you will need sufficient capital. After that, you can begin drafting essential documents such as a:

  • franchise agreement;  
  • disclosure document; and
  • operations manual. 

You can also consider whether you will offer training to your franchisee to ensure success. Lastly, you must decide how the lease will be managed and by whom. 

If you need help franchising your business, you can contact our experienced franchising lawyers to assist as part of our LegalVision membership. You will have unlimited access to lawyers who can answer your questions and draft and review your documents for a low monthly fee. Call us today at 0800 005 570 or visit our membership page

Frequently Asked Questions

What is a franchise operations manual?

An operations manual will instruct your franchisee on using your systems and equipment. With this, they can instruct their staff. However, you should give this to the franchisee only after signing the agreement. 

Is my franchise agreement legally binding?

The franchise agreement will legally bind both parties once they sign it. It is a compulsory document that will ensure your franchisee can make an informed decision.

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