Building a Network of Franchises from the Bottom Up
18 April 2019
Ms Guillaume Lapierre, LL.B., LL.M.
Franchising is an interesting operating mode that brings many entrepreneurs great commercial success. A recent video featuring Nancy Raymond [in French], CEO of Steamatic Canada, is a great example of how franchising can work. Yet, establishing a name for yourself and becoming a successful franchiser is not something that happens overnight. This article explains some of the steps entrepreneurs should be taking in order to build a network of franchises in the future.
Develop of Deep Understanding of How Franchises Work
First things first, any entrepreneur planning on launching a franchise network has to understand the mechanics of how franchises work, and their drawbacks. By franchising, entrepreneurs can grow by significantly increasing their turnover while limiting their commercial risk. In fact, the franchisees are the ones that have to obtain the operating rights to the business, and therefore take on a significant portion of the commercial risks tied to opening a new location. To make sure that their foray into the franchising sector is a positive one, franchisers have to carefully select their franchisees from day one to prevent the risk of trade disputes or conflicts of personality.
Get to Grips with Intellectual Property
Before establishing a network of franchises, entrepreneurs must adequately protect their intellectual property, which is one of their main assets, and they need to do it early.
The most important aspects they need to protect are the name of the business, its main slogans, and the logos and designs that make the company recognizable. Canada’s franchising past is full of examples* where executives have tried to franchise their company without previously having registered and protected aspects of their intellectual property, or have chosen names and other elements that cannot be “protected” in the eyes of the law, like ideas and innovations in the development phase.
Grow Your Customer Base
To develop a network, you need a certain amount of public notoriety and recognition. A franchise’s customer base must grow continuously. Franchisers therefore have to significantly invest in advertising and marketing. Usually in franchise contracts, franchisees are required to invest in a network advertising fund, which is managed by the franchiser.
Protect Your Assets
It’s also equally important that you protect your personal assets. There are different types of corporate structures that enable you to do this, such as incorporated companies, which is why you need to understand all the different types and implement the right type for your company when you decide to expand into a franchise network.
Take Steps Towards Standardization
Finally, you should also think about standardizing company operations. A future franchiser must be able to implement internal policies and processes that foster the highest quality standards. For example, some franchisers create operating manuals that outline all of the processes that must be followed by franchisees. This enables franchisers to maintain consistency in all of their franchises.
Taking these steps early in the life of your company is crucial for anyone planning turn to their business into a franchise. Surrounding yourself with other professionals well versed in the franchise world can also help you to develop your company and avoid serious missteps.
* Companies who don’t adequately protect their intellectual property face a higher chance of being confused with other similar concepts and of having their intellectual property rights infringed.
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