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Are you a retail business owner considering strategies for expansion and growth? You may have succeeded in your local market and are considering scaling your business. Franchising has provided a pathway for growth across a wide range of sectors, and the retail industry is no exception. This article will explain how to franchise a retail business and also explore the advantages and disadvantages of franchising.
Retail Franchising
Franchising can be an excellent strategy for business expansion. The franchise structure offers possibilities for rapid expansion, increased market reach, and broader brand recognition.
By franchising your retail business, you will allow others to operate under your business’ name, branding, and trademarks. You will also supply franchisees with the necessary products and operating systems so they can run their retail outlet. Franchising not only helps businesses to expand but also provides entrepreneurs with a proven model for success.
How to Franchise a Business
As with any franchise, you must take several steps to begin your journey.
1. Ensure Your Business Model is Franchisable
Check that you can franchise your business. Franchising is not suitable for all businesses. There are no set rules on what companies are and are not franchisable. This step is more like a business health check.
First, you need a long-term plan and a successful business model to attract franchisees and to create the best chances of success. Then, you must ensure your business model is replicable. This allows consistent branding and customer experience across the franchise.
Consider whether:
- your business model and operating systems are simple enough to be replicated;
- the business model offers financial predictability; and
- there is demand for your products and services.
2. Get the Necessary Legal Documents in Order
If you decide franchising is suitable for your business, you must prepare particular legal documents, including:
- the franchise agreement; and
- the operations manual.
3. Advertise the Franchise Opportunity
The next stage is to advertise the franchise opportunity to potential franchisees. Consider the type of person suitable for the role and market to them accordingly.
You could advertise via:
- word of mouth;
- online franchise directories; or
- social media.
4. Onboard the New Franchisee
Once you find a suitable franchisee, you will begin the onboarding process. At this point, you will supply the prospective franchisee with the franchise agreement and the disclosure document. Once the new franchisee signs the agreement, you will take the initial fee and begin training them to run their retail store.
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Advantages of Franchising Your Retail Business
The following table outlines some of the advantages of franchising a retail business.
| Advantage | Explanation |
| Scalability | Retail franchising is a great way to scale your brand. By opening new locations, you can tap into customer bases and expand the recognition and value of your business. |
| Income | Franchisees will pay you an initial fee for their rights to use your branding and to set up their unit. This means the franchisees take on the cost of your brand’s expansion. Following this, they will pay ongoing fees while they operate their business. The steady flow of income from franchising is attractive to franchisors. |
| Management | Managing a growing retail business can take much time and effort. Franchising offers an opportunity to outsource the management of the retail units. Franchisees will manage the day-to-day operations of their companies. |
Disadvantages of Franchising Your Retail Business
Bear in mind that owning a retail franchise is challenging.
| Disadvantage | Explanation |
| Loss of control | By lending the use of your recognised brand to others, you are open to the risk of inconsistencies. However, you can mitigate this risk by providing franchisees with clear instructions within the franchise agreement and your operations manual. |
| Continued investment | You must continually invest your time and money into the franchise. As a franchisor, you will provide training and ongoing support to franchisees. |
| Sharing of profits | The franchise agreement you share with franchisees will outline that franchisees must pay you a percentage of their profits. This has the advantage of a regular income but means the franchisee will profit from your business idea. |
Discover the key legal and commercial issues to consider when buying a franchise.
Key Takeaways
Franchising can be a great pathway to grow your retail business. To franchise your retail business, you first need to ensure that it is franchisable. Check that your business model is simple enough to be replicated. There should also be demand for your products and services. You will then move on to preparing for franchising. This involves preparing legal documents and advertising the franchise opportunity to prospective franchisees.
If you need legal advice about franchising your retail business, our experienced franchise lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
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