If you have a successful business and are looking to expand, you might want to open additional outlets. Franchising your business can be a very effective way of doing this. Instead of financing and managing the new outlets yourself, you work with independent franchisees.
Business format franchising
With business format franchising, you put together a complete business package. You then licence this format to franchisees. They run their own businesses, but use your brand and proven business model:
- you provide an operations manual, detailing how to set up and manage a new outlet - see develop your franchise format
- you agree a contract with your franchisee setting out what rights and obligations you each have through the franchise agreement - see the franchise agreement for a franchisor
- the franchisee pays you franchise fees and royalties for the right to use your business concept
- you train and support the franchisee through their start-up period - support could include ongoing marketing, business growth help, regular regional meetings or how to negotiate purchasing contracts
Other franchising arrangements
This guide focuses specifically on business format franchising. However there are other business arrangements which are sometimes also referred to as franchising, including:
- selling a licence allowing someone else to manufacture and sell your product, but without telling them how to run their business
- using an agent, who sells your product on your behalf
- setting up a distribution agreement, whereby you sell your products to another business that then sells them to their own customers
For more information on using agents and distributors, see sales channels to reach your customers.