Top 5 Tips For Franchisors

Anyone looking to franchise their business will need a robust agreement in place, in order to protect their IP, culture and financial interests. There are numerous things to think about but here are 5 suggestions to get you started:

1. Branding protection:

Your website domain name, business logo and any other business-related branding will all need registering (if you haven’t already done this when setting up the original business).

2. Consistency and quality:

A key component of successful franchising is ensuring that all franchisees meet the same high quality standards. You should therefore include clear parameters around advertising, brand promotion, approved suppliers, pricing and training.

3. Ownership of business materials:

To ensure consistent quality and cultural fit of franchisees, you will likely have created a substantial volume of background material, including a pre-contract information pack, business handbook and training materials. These materials will directly link to the value of your franchise and so it is vital to ensure that franchisees cannot use those materials other than in the furtherance of your business. You’ll want clearly worded restrictions and meaningful penalties to discourage non-compliance.

4. Geographical scope:

This needs to be wide enough that each franchisee has a large enough market to be profitable but not so large that it impacts on your future franchising capabilities. The size of a franchisee’s territory will naturally depend upon the type of goods and services being offered. The type of goods and services will also influence whether you want to grant exclusive or non-exclusive rights within a particular territory.

5. Restrictive covenants:

As a franchisor, you want to ensure that franchisees don’t use the knowledge and experiences from your business to set up, or join, a competing business. But - as with all contracts - you need to tread carefully in order to ensure that any restrictive covenants will be enforceable.