How to Turn your Business into a Franchise

The first step to turning a business into a franchise is understanding that a franchisor is the original business, and it sells the right to use its name and concept to the franchisee. The franchisee buys this right to sell the franchisor’s goods or services under an existing business model and trademark. Turning the business into a franchise is very lucrative avenue in South Africa, as it allows for business expansion of an increased scale, better market penetration, simpler management, and decreased costs.

Steps to Turn your Business into a Franchise:

Determining whether Franchising is right for your Business

Like every profitable business decision, franchising and the decision to franchise your business needs to align with your long-term goals. As a business owner and founder when you franchise your business you are starting a journey of learning franchising, entering the franchise industry, and building an organisation that, as it progresses, will be training, supporting, and assisting future franchises to succeed.

2. Issuing the Franchise Disclosure Document

The franchise disclosure document, is a legal document necessary to franchise your business and sell franchises, as required by The South African National Consumer Protection Act (CPA). The document is prepared specific to your business, and competitively positions the franchise that you are offering. Franchise Administration can assist with drafting a legal and compliant franchise disclosure document.

3. Creating a Franchise Agreement

The franchise agreement should outline the rights and obligations of both the franchisor and the franchisee. The main purpose of this contract is to protect the intellectual property of the franchisor. The terms, conditions, and methods of operations of franchises vary widely depending on the type of business.

4. Preparing an Operations Manual

You required to prepare an operations manual for franchisees. Franchise Operations Manuals serve as a blueprint and how-to guide of a franchise system. During the franchising process you will prepare an initial version of your business’s operations manual. The Manual, among other key aspects, includes product and service requirements, operation standards, as well as designated suppliers and inventory requirements.

5. Registering Trademarks

Because your franchise system will revolve around your brand’s trademarks, including licensing them to franchisees, registering your trademarks is an important part of the franchising process. Registering your trademarks, in this way, enhances your freedom to operate.

6. Establish your Franchise Company

Your franchise company is the legal entity that will offer and sell franchises. It is formed during the franchising process, before issuing the Franchise Disclosure Document. This may take the form of a Close Corporation or Limited Liability Company. It is vitally important that franchising activities take place in a legally distinct corporate entity. Forming a new franchise entity is also an important step as it allows you to shield your current business from future franchising obligations.

7. Register and File your Franchise Disclosure Document

Within this step, you are required to file and register the Franchise Disclosure Document.

8. Create Your Franchise Sales Strategy and Budget

Once all of the above mentioned steps are implemented, you then create a franchise sales strategy and budget. In this step you evaluate your target franchisees, target markets, interest in your franchise, and a realistic budget for attracting, training, and supporting franchisees.