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How to Franchise a Business?

Franchising is an arrangement where the owner of a proven business format or system (the Franchisor) agrees, for a fee, to allow a person or company (the Franchisee) to trade using the same product, service, or trade name, and passes the benefit of its know-how to that person or company.


The four essential elements are:

  •  Legal contract between the Franchisor and Franchisee
  •  Training provided by the Franchisor to the Franchisee
  •  Operations Manual developed by the Franchisor for the guidance of the  Franchisee
  • Ongoing support provided by the Franchisor to the Franchisee


In effect, franchising is a business partnership in which both parties, the Franchisor and the Franchisee, depend on each other for continued success. The franchise relationship is governed by a detailed legal agreement usually for a minimum period of five years. This agreement sets out the rights and responsibilities of each party and should contain the right to renew at the end of the term, subject to satisfactory progress.


Whilst the purchase of a franchise helps to avoid many of the pitfalls of starting up from scratch by “buying into” a proven business system, it will still require just as much hard work, determination and self-motivation on the part of the Franchisee as with any other business start up.


Franchising your business is like setting up a new business. You’ll need a proper plan, proper management, and proper funding.



We’re assuming here that you have a business that’s suitable for franchising. Ask yourself these questions:

  • Have you run a successful business for at least one year?
  • Have you proven your concept?
  • Will it survive in the long term?
  • Is it profitable?
  • Can you produce audited accounts?
  • Do you operate in a niche market or offer something different in an established field?
  • Can your business be replicated and easily taught? Can you offer leadership, strong management, motivation and support?
  • And can you offer a franchise at a cost that is good value for money and can make a decent return on investment in the short to medium term and a good living for its owner?
  • If you can answer yes to most of these questions you may have a business that can be franchised.


There are two essentials– a Franchise Agreement which sets out the term of the contract and the obligations of both Franchisor and Franchisee, and an Operations Manual which gives a detailed description of your system and how to operate it. A solicitor can put the first document together but only you will know what needs to go into the Operations Manual.


As with any new business, you will need adequate working capital. You cannot franchise on a shoestring. The best advice is: do it properly, or not at all. Just how much money you’ll need depends on how you propose to go about it.Apart from paying for professional advice as to the most cost-effective way of developing your franchise, you’ll need to pay for advertising to attract prospects, collaterals such as brochures and video presentations, and general expenses, including travel, hire of rooms, entertainment, etc.


When the first franchisees come on board you will need a Franchise Support Manager to deal with them, someone with leadership qualities who knows your business and is a good communicator. He or she will be the day-to-day link between the franchisees and the company. If this person is appointed from within, you may need to hire a replacement to do the work he or she was previously doing.


Remember, you need to be in franchising for the long haul. So prepare for it. Franchising is not easy, and it’s not cheap. Building your new business takes time and patience.


For most people, buying a franchise means a career change and an investment of their life savings. They don’t make that decision on impulse. They research the opportunity very carefully and put you–the Franchisor–through the hoops to make sure they are making the right decision.


The courting period can take several months, and it could take several years before your network is well established and your investment begins to pay off. But it can be well worth the effort.


When you sell a franchise you are expanding your brand (using other people’s money) and creating an income stream (from royalties or management fees) for the foreseeable future.



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