Guide

Turn your business into a franchise - eight top tips

Franchising can be a very effective way of growing your business. Our top tips outline how you can successfully franchise your business:

1. Explore the options: There are a number of franchising options. The most popular route is business format franchising. This is when you put together a complete business package for a franchisee. Read more about franchising options.

2. Consider the advantages and disadvantages: Gain an understanding of the advantages and disadvantages of franchising. This will help you to decide if franchising is a suitable option to help you expand your business - see advantages and disadvantages of franchising your business.  

3. Market test your franchise format: To franchise your business, you need to convince potential franchisees that they will make money. A good way of proving that your franchise business model is sound is by market testing to show demand for your product or service. It is also advisable to test a pilot franchise operation to find out if your franchise model works. This will also give a franchisees a good indication of likely set-up costs, break-even points and how long it will take to become profitable.

4. Develop a franchise operations manual: A franchise operations manual should give detailed information on how to set up and manage a new outlet. It will highlight key information to help the franchisee establish their franchise outlet. The manual will help to ensure that quality and consistency is maintained. See develop your franchise format.

5. Produce a franchise agreement: A formal legal contract is one of the most important aspects when franchising your business. It will clearly set out the rights and obligations for both the franchisor and the franchisee. You should seek legal advice when drawing up your franchise agreement. See the franchise agreement for a franchisor.

6. Set your fees: When you franchise your business you will make money from the fees the franchisee pays you. You will normally charge an initial fee for the purchase of the franchise and then charge continuing fees. It is important that you set the right level of continuing fees. If the fees are too high the franchise will not be attractive to new franchisees and existing franchisees might struggle to keep operating. Find out about franchise fees and royalties.

7. Market your franchise: You should prepare a franchise prospectus or brochure to inform potential franchisees what you are offering and what they can expect. You should include details of your products or services, franchise territories, fees and financial returns. Read more on marketing your franchise opportunity.

8. Manage your franchisees: Franchising your business isn’t about selling franchises and then forgetting about them. You must maintain a continuing relationship with your franchisees. You should provide ongoing support to your franchisees and help motivate them to sell your products and services. See managing your franchisees.

For further information see our guidance on franchise your business and our video case study how I turned my business into a franchise - the Zip Yard.