5 keys to setting up a franchise

Ash Baggott

Thinking of setting up a franchise? Kudos to you, it can be a daunting task to take on. You will have to consider a lot of legalities, however, a successful franchise can result in plenty of rewards.

A franchise is a contract that’s completed between two independent parties, under which, one half (franchisee) is granted rights to market a product or service using the trademark or trade name of the other half (franchisor). This agreement means that the franchisee has to pay a fee to the franchisor for the rights to use their product/service, and the franchisor has to provide trademark rights and backing to the franchisee.

Franchise’s can be found in almost all sectors of business from banking, restaurants, hotels to retail, you name it. There are two forms of franchising that are common today;

Product / trade name

This arrangement entails that the franchisee pays a fee or buys a minimum amount of products from the franchisor in order to receive the rights to sell the name/trademark. This is most popular within the vehicle, bottling and tire sectors.

Business format

This is by far the most common form of franchising. This is where the franchisor assists the franchisee in setting up and running the business, supplies the product(s), provides training, marketing plans, and helps with financing. In return, the franchisee pays royalties and fees to franchisor.

What are the keys to setting up a franchise?

Now you’ve decided to start one and you’ve decided which type you’re going to run, this is where the hard work begins. There are certain steps you’ll have to explore to ensure you’re ready to begin your business;

  1. Cover your start-up capital to get you up and running: The amount will depend on the type of business you intend to run, the costs may be high and take a long time to recover. However, if your efforts are successful, you’ll begin to see a return quickly.
  2. Prepare yourself for the extensive legal issues involved: Officially register your name and trademark as soon as possible. You’ll need to provide detailed financial information. You might also need to seek advice from a solicitor to ensure your contracts are compliant and you’re protected. 
  3. Have a strong and marketable brand: Appeal to your target market, establish the reputation amongst customers, and increase your potential for returning a high profit margin. Your franchise will need to have a unique selling point to set you apart from other brands out there.
  4. Location, location, location: What location makes the most sense for your business? Does the business have brand recognition already? Are you in a low traffic area? Consider your options when choosing your location, try to keep your overheads relative to a successful return on investment.
  5. Prepare for your opening day: With everything firmly in place, the final step is to get your franchise up and running. Make sure you’re completely ready to open the doors, do you have the resources in place? The staff? The cashflow? The location? All of the legal documents, and the go ahead? If so, go forth and conquer the franchise world!

Ultimately, franchising involves its fair share of risks and rewards, you need to make sure you’ve done your research thoroughly before signing any legal binding agreements. For franchisors, it will provide opportunities for expansion and large-scaled economies of scale. For franchisee’s, starting a franchise will bring a pre-established reputation and reduced risks. Before making your decision, it’s important to remember that franchising is a full-time commitment, so you need to ask yourself, are you ready for it?

If you are, Holded’s ERP software is the perfect way to ensure your business has a way of managing its sales, finance, operations and human resources in one beautiful platform.

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