Why you need to franchise a business

Why you need to franchise a business

A proven route to rapid growth, franchising is an exciting marketing strategy that helps you expand your business to higher levels. This, however, doesn’t mean it’s an instant ticket to success. Let’s talk about how you can franchise your business and make sure it soars.

Every business owner dreams of seeing their brand become a household name with a very strong market network and reach. One of the best ways to achieve this is by franchising your business.

By allowing outside capital and letting franchisees bear your name and use your business systems, you open up your company by harnessing its potential to achieve more financial success.

Other benefits include:

  • As franchisor, you will no longer be concerned about the day-to-day operation of individual franchise units or outlets
  • Your organisation will be more compact and strong, opening its doors to earning more profit without involvement of high capital risk
  • You will only need a small core group staff, and thus fewer staff issues and challenges would be experienced
  • Your business will be able to have access to wider and more secured outlets for your products and/or services
  • You will be able to serve national or international customers via your wide network of franchise outlets and units

But before finally deciding on opening your business to prospective franchisees, take into consideration the following:

  • Business readiness
  • Legal and other requirements
  • Business model
  • Hiring needs
  • Franchise sales
  • Franchisor responsibilities

Business readiness

Is your business ready for franchising? There’s no doubt a well-thought-out and well-executed franchising model catapults your business into becoming a household name and worldwide organisation, but first you have to make sure you and your business are up to the demands and challenges of being a franchisor.

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Consider these things before franchising your business:

  • Pilot-testing must be done on company-owned and -operated outlets
  • Take professional and expert advice from your solicitor, bank, accountant, and a trusted franchise consultant
  • Develop a sound and practical operations manual
  • Develop a selection system to make sure you only open your business to the best franchisees
  • Refrain from unnecessary overselling
  • Your training and training systems should be first class or on a very high level of sophistication
  • Understand franchisee satisfaction and profitability, and streamline your business specifics
  • Always be open to opportunities for franchise development while maintaining satisfactory standards
  • Always insist on first class marketing, advertising, and public relations

Legal and other requirements

Seek legal and professional advice on how to make the necessary preparations in becoming a franchisor. Speak with your solicitor, bank, and/or a franchising consultant. Know if there are requirements for franchisor registration, prepare these requirements, and complete the process.

Understand your tax obligations and how franchising fees are treated for taxation purposes. Reviewing your income tax and goods and services tax (GST) also helps. Note that in most cases, the payments you receive from your franchisee(s) will be treated as assessable income, which will also involve GST.

As a franchisor, you can operate under various structures and systems, and as with any business, your tax responsibilities will be determined by these structures and systems as well as your assets and income. Learn more about tax and other requirement specifics by visiting the franchising and tax page on the Australian Taxation Office (ATO) website.

Business model

Decide on how you will operate as franchisor. Remember that your business model, structure, and system will affect each franchisee and their individual unit or outlet.

The key points you need to decide on include:

  • Franchise fee and royalties
  • Terms and specifics of your franchise agreement
  • Size territory for each franchisee
  • Locations/geographic territories you are offering franchises within
  • Type, length, and level of training program you will offer
  • Whether or not each franchisee would be required to purchase products and/or equipment from your company exclusively
  • Whether there is a need for an owner-operator for each territory who will develop multiple franchise units

Learn more about how a franchise operates.

Hiring needs

An advantage of being a franchisor is the need for a small core group within your company. But this doesn’t mean just hiring anyone. It means you have to select the best and most appropriate people for each specific role/position in your core group of staff.

You will hire people who understand your need to focus on assisting your individual franchisees and seeing to it that they are satisfied, all while ensuring that the highest standards of operations are observed and complied with in all franchise outlets/units.

Franchise sales

Probably one of the most important considerations, making sure your franchises sell is as self-explanatory as it is essential. You need to be able to find franchisees and convince them that your brand is profitable.

By now, your salespeople should be able to tell a compelling story about how your brand is worth the investment. Here, establishing a high level of trust with prospective franchisees is key.

Franchisor responsibilities

Besides maintaining the highest quality possible for your brand, another important franchisor responsibility you need to understand is providing support to your franchisees. The amount and quality of support you give your franchisees will ultimately decide the success or failure of your company.

Make sure to only provide and implement training programs of the highest standards. Be pragmatic and sharp, but also flexible and fun! Your trainings should see to it that all products and services are offered in the best possible manner, in a uniform experience, no matter which unit/outlet your customers visit.

Now that you’ve already taken into account all the above considerations, it’s time to ask yourself if you are ready to have your brand bigger than you. If well-planned and well-implemented, your franchising business will surely take your brand and company to more exciting heights.

Why you need to franchise a business
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