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As a prospective franchisor, creating a good business plan is critical. A well-crafted business plan will outline your vision and strategy for your franchise network. It will be a crucial document that you can follow to turn your business model into a successful franchise network. At this stage, you should understand the legal considerations of this type of business planning. This article will explore the key legal aspects you should consider when writing a business plan for your franchising venture.
1. Your Franchise Business Strategy
A core part of your franchise business plan is the strategy you intend to adopt to take your franchise system from a proven business model to a growing franchise system. Being thorough will help you to get your plan onto paper. The clearer you can present your business strategy, the more likely you are to develop a viable and scalable plan.
A comprehensive business strategy will outline how you plan to grow and manage your franchise network. It will cover aspects such as:
- operational plans;
- your business model’s competitive position;
- marketing and sales strategies;
- franchisee recruitment strategies; and
- franchisee support systems.
If you are beginning with a new business idea, you should conduct a pilot to test it before franchising. You should start your franchising journey with a viable business model. To ensure it is feasible as a franchise business, you should have successfully tested this model in at least one location for at least a year. You should also conduct thorough market research to determine if you can successfully franchise your business model.
Consistency is vital in franchise systems. You want customers to recognise your franchised brand whether they approach Franchisor A at their location or Franchisor B at a separate location. Within your plan, your objective is to articulate the operational standards and procedures a franchisee should follow. This can include aspects such as quality standards, branding, and health and safety regulations.
2. Your Financial Plan
When planning, consider how much capital you will need to invest to turn your business model into a franchise. Your financial plan should factor in fees such as:
- the cost of legal advice;
- recruitment costs; and
- the cost of developing comprehensive training programs.
Through planning, you may decide to set aside a certain amount of funding for these specific tasks.
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3. Planning the Franchise Agreement
Franchise agreements will form the cornerstone of your relationships with franchisees, so it is crucial to consider their terms when planning your franchise venture. Within your business plan, outline the terms and conditions under which franchisees will operate.
At this stage, you can highlight the critical components of the franchise agreement, such as:
- fees;
- territory rights;
- support and training provisions; and
- performance standards.
This outline will help you formulate your franchise agreements later. When you need to draft the agreements formally, you can refer to the contents of your business plan. At this stage, ensuring that your franchise agreements are robust is crucial.
4. Intellectual Property Protection
Your business plan should outline your strategy to protect your brand’s intellectual property (IP). Your business’s IP includes its:
- trade marks;
- patents;
- copyrights; and
- trade secrets.
When franchising, it is especially crucial to protect your IP. These form vital assets of your franchise system, branding and business model. Proper IP protection helps maintain brand integrity and provides a route to legal action should an unauthorised party use your intellectual property. You should register your patents and trade marks with the Intellectual Property Office (IPO). A lawyer can help you do this.
Key Takeaways
Writing a business plan for a franchise venture involves more than outlining your business strategy. Whilst writing, you should pay careful attention to several legal considerations, including the following:
- your overall strategy to turn your business into a viable model for franchising;
- your financial plan;
- the outline of the franchise agreement; and
- your strategy for protecting your brand’s intellectual property.
Addressing these points helps safeguard your interests and establish a sustainable franchise network.
Franchisees should also write business plans for their locations to ensure a clear path to profitability and to secure funding from investors. Your business plan will be broader, focusing on building a successful franchise network.
If you require legal advice about franchising your 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.
Frequently Asked Questions
A business plan outlines your vision and strategy for your franchise network, helping you turn your business model into a successful franchise system. It also addresses key legal considerations to safeguard your interests.
Conducting a pilot test ensures your business model is viable and feasible as a franchise. Testing the model in at least one location for a year and conducting market research helps determine if your business can be successfully franchised.
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