When is the right time to franchise my business?

Franchising can be a powerful way to grow. However, it’s not as simple as handing someone your idea and letting them run with it.

Before you start, it’s essential to understand what makes a business franchiseable, how to prepare for expansion and what steps to take to build a network that lasts.

We asked some of the UK’s leading franchise experts to explain what it really takes to become a franchisor…

Can anyone set up as a franchisor in the UK?

In short, yes. As John Pratt, senior partner at specialist law firm Hamilton Pratt, explains, “In the UK, there are no legal restrictions on anyone becoming a franchisor. However, franchising is not about licensing an idea. It’s about licensing a proven business system that you know actually works if your franchisees follow the system.”

Before a business can even think about selling franchises, it must have a strong foundation. “All franchisors should have an existing and successful business, which they have then ‘pilot tested’,” Pratt adds.

Pilot testing ensures the model works not just because of a great team or location, but because others can “successfully replicate the business following a tried and tested system.” This includes trialling the idea in different parts of the country.

The steps are straightforward, if not simple: build a profitable business, document your processes and test your system with pilot franchisees.

Only once you’ve achieved this, should you move towards franchising. “Because it’s only at this stage that you have anything to sell to prospective franchisees,” notes Pratt.

Why do businesses choose to franchise?

The motivation is often growth – but done strategically. “Franchising a business is not always the right or easiest route to expansion,” says Louise Harris, principal at Franchise Projects. “However, done well, it can be a win-win for all parties.”

Franchising allows a brand to expand nationally or internationally “through dedicated individuals” who have a vested interest in maintaining standards.

As John Pratt puts it, franchisees will “try harder to make a success of the business than would otherwise be the case with an employee.”

Brian Duckett, former chairman of The Franchising Centre, adds that franchising can even be used creatively – for instance, converting existing managers or competitors into franchisees. He calls this process “conversion franchising.”

The result? “You get a franchisee and a location all in one go and you take a competitor out of the market.”

How can I tell if my business is franchisable?

According to John Pratt, it’s often easier to spot when a business isn’t franchisable. “If your business is unsuccessful or if the business is successful because of you and your special abilities,” franchising may not be the right path. Similarly, it may not be the right path if your business relies on untrainable skills or short-term trends.

Even if your business is franchisable, that doesn’t mean you should jump in. “Franchising is by no means cheap,” Pratt cautions.

Between legal documents, marketing and recruitment, it may take years to reach profitability. Still, if you’re keen to grow using other people’s capital and your model thrives on the motivation of owner-managers, franchising can be a smart route.

Before spending heavily on consultants, Pratt advises prospective franchisors to do their homework. “Obtain as much information about franchising as possible… there is quite a lot of free information you can obtain before spending money with expensive franchise lawyers or consultants.”

What kind of businesses lend themselves to franchising?

Vicky Wilkes, head of legal at Aston Villa Football Club, says, “The main characteristic of a franchiseable business is a business format that can be easily replicated.”

She adds that it should have “a proven track record, including a well-known name in the marketplace,” and “systems, procedures, expertise, skill and know-how… capable of being transferred relatively easily to others, through training and following an operations manual.”

Brian Duckett agrees, noting that “any business that can be run as a branch network and wants to grow should at least consider franchising as one of the options.”

However, he cautions that “businesses that are failing, or are currently no more than an idea, are not good propositions for franchising.”

Culture is also key. “It helps if the business has a culture of working together to achieve a shared purpose,” says Duckett. Franchising is, after all, a partnership model, not a one-way street.

When is the right time to franchise a business?

Timing is everything. Shelley Nadler, legal director at Bird & Bird, says that before franchising, it’s essential to establish at least one pilot operation “to ensure the proposed franchise system works in practice.”

This should ideally run for at least a year – preferably two – to prove the model is viable in different conditions.

Pratt agrees: “Franchising is not about franchising an idea, but about franchising a business concept that you have proven works.”

He recommends having “one or more pilot franchisees for a minimum period of 12 months,” during which time you can fine-tune operations manuals and systems.

In practical terms, there’s no minimum trading period require. However, Pratt warns that “new franchisors that have not operated a successful business and pilot tested will find it increasingly difficult to recruit franchisees.”

What are the first steps in franchising my business?

Louise Harris says, “I recommend that you thoroughly research, starting with the British Franchise Association website. Consider attending one of its courses.”

Working with a franchise consultant can also make a huge difference. “It may feel expensive to take this route, but it will increase your chance of success, with less trial and error,” Harris notes.

Alan Wilkinson, head of franchise development at The Franchising Centre, adds that the process should begin with “a franchise business blueprint” to define fees, training, support and territory planning.

Once that’s complete, “the systemisation and documentation phase can commence, including franchise operating manuals, legal agreements and recruitment processes.”

What else do you need to do before launching a franchise?

Legal groundwork is essential. Shelley Nadler stresses the importance of protecting intellectual property before franchising. “The trade name and logos must be registered either at the UK Trade Marks Registry or as a European Community Trade Mark.”

She continues, “You must make sure that all copyright material that you use is owned by you. If it’s owned by someone else, will that person allow your franchisees to use these rights?”

An operations manual and robust franchise agreement are also vital. These protect your franchise system and ensure every franchisee operates to the same standards.

Nadler warns that even recruitment materials and franchise sales processes should be handled carefully. “Make sure that the literature provided is carefully prepared and reviewed by your lawyers. Also make sure that sales people who recruit franchisees are properly trained so that they do not misrepresent the business.”

What makes a franchise viable and successful?

According to Shelley Nadler, a viable franchise must be “distinctive enough in its total image,” have adequate capital, and attract franchisees with the “right attitude and commercial experience.”

Successful franchising also depends on “adequate support in all operational, financial and logistical areas” and “meticulous planning” to ensure long-term sustainability.

Brian Duckett echoes this sentiment, noting that “a good franchise is usually a proven franchise. The more franchised outlets a system has operating… and the more those franchisees are achieving the performance claimed by the franchisor, the more proven the franchise is.”

Conclusion

As John Pratt concludes, franchising “is not about licensing an idea” – it’s about building, testing and proving a system that others can successfully replicate.

With careful preparation, pilot testing and expert guidance, creating your own franchise opportunities can be a powerful way to grow. But as every expert here agrees, it requires patience, investment and the right foundations to succeed.