Many entrepreneurs are starting home-based businesses in light of the pandemic. As a New Zealand business owner, you may work from home while considering growth and expansion. Starting a home-based franchise may be a suitable option, although there are some steps to undertake. You need to consider franchise agreements, franchisees, and your current business model. This article will guide you on how to open a home-based franchise.
Your Current Business Model
Firstly, you need to consider whether your current business model and systems are suitable for franchising. You need to create a business model that is easy to replicate so your franchisees can be as successful as you. Moreover, you need standardised systems and processes that each franchisee can use easily. You may choose to draft an operations manual that can instruct franchisees on how each system can be used.
Furthermore, you must alter your current business plan to fit a franchising model. You may also wish to detail:
- your goals for growth;
- intended locations; and
- financing.
Opening a franchise can be a hefty investment, making it vital to have sufficient capital. You can ask your bank or an investor for a loan if you do not have the funds.
Recruiting Franchisees
After altering your business model and finalising systems, you can start looking for suitable franchisees. You can begin by creating a job description detailing:
- key responsibilities;
- skills needed; and
- a background of your franchise.
You can utilise several job boards to reach as many candidates as possible.
When recruiting franchisees, it is important to outline their role clearly and ensure they can manage a franchise. Moreover, it is important not to rush the recruitment process; else, you may make a bad hire.
Lastly, it is important to conduct due diligence on your potential franchisees to confirm their:
- suitability;
- experience; and
- qualifications.
Franchise Agreements
Your franchise must provide a franchise agreement to each franchisee. This agreement is legally binding and outlines the relationship between you and your franchisee. Hence, your agreement can include details relating to:
- a grant of rights to intellectual property;
- the length of the agreement;
- territory;
- franchise fees;
- approved suppliers;
- training; and
- a renewal clause.
This agreement is essential to allow your franchisee can make an informed decision. You may also provide a franchise disclosure document to outline your franchise’s key facts. A disclosure document is compulsory if you are a member of FANZ. Your disclosure document can detail elements like:
- the cooling-off period;
- franchise systems;
- dispute resolution;
- your business experience;
- initial investment;
- franchisee’s obligations;
- any assistance you may give, such as marketing or finance; and
- your products and services.
Intellectual Property (IP)
Before granting rights to your franchisee to use your IP, you should consider protecting it adequately. Any logos, brand names, and images can be protected through a trade mark registration. You can apply for a trade mark through the Intellectual Property Office of New Zealand (IPONZ), although you will need to ensure that a similar or identical trade mark does not already exist.
If your franchise uses a new invention or process, then you can choose to apply for a patent. This will ensure that competitors cannot copy your invention to their advantage. However, original works such as art will be automatically protected by copyright.
To allow your franchisee to use your trade mark and any patented or copyrighted material, you need to grant them licensing rights. Essentially, you will be licensing your IP and allowing your franchisee to legally use it in their franchise business. Often such a grant will have a limited time period.
Consider Territory
As a home-based franchise, you may expect your franchisees to work from home or help them open an office in a particular area. However, you must ensure your franchisees are not competing with each other by allocating them to the same territory. Hence, you must consider where each franchisee will open a franchise and whether the location is viable. You can confirm this through market research to ensure a potential or existing customer base exists.
This publication provides you with the fundamentals for franchising your New Zealand business, including set up, branding and management.
Key Takeaways
Opening a home-based franchise is a great strategy for growth and expansion. Firstly, consider whether your business model and systems can be easily replicated. Secondly, you need to recruit suitable franchisees who have the skills to run a business and expand your great reputation. Moreover, you must prepare franchise agreements and disclosure documents for each franchisee. Likewise, it is essential to protect your IP and carefully consider where each franchise will be located.
If you need help opening a home-based franchise, our experienced franchise lawyers can 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
A franchise agreement will govern the relationship between you and your franchisee. Hence, it can outline critical responsibilities and obligations for both parties, from fees to training.
You can protect your brand name through a trade mark. You need to apply for one on IPONZ, which will accept or reject your application.
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