How to franchise a small business: a step-by-step guide

12 February 2019

If you have a strong brand and business system that’s easily replicated, along with the ambition to match, then you could be in a position to start a franchise. With the right research and due diligence, you could stand to benefit from faster expansion, a reduced level of financial risk, and a boost in your profitability.

Creating a successful franchise requires careful planning, however. It’s a time-consuming process that requires organisation, legal know-how and plenty of dedication when it comes to finding the right people. If franchising is somewhere on your radar but you’re unsure where to start, then check out this helpful step-by-step guide of building and sustaining your next business move.

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Determine if you're business is ready

In reaching your decision, you’ll have to ask yourself whether your business is suited to a franchise model. There are a few things to weigh up, aside from having a track record of sales and profitability. Take for instance, what your franchise’s concept might be. A strong concept is one that appeals to both consumers and prospective franchisees, that can be easily replicated without you needing to oversee it in person. Consider whether the concept is saleable, has the potential to be cloned and can provide you with good returns down the line.

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Does your company have a strong brand identity? Consumers and franchisees are able to connect more readily with a business that has memorable branding. If you’re looking to refine things before you go any further with the process, then be sure to give our guide to crafting a brand identity a read here.

From here, it’s important to gather up market research. You might have keen instincts that everything will succeed, but it’s important not to go with your gut. Carry out the necessary market research in order to confirm that there is widespread consumer demand as well as room in the marketplace for a new competitor.

Lastly, be aware that as a franchisor, your previous activities as a business owner will be subject to change. It’ll require you to relinquish control in ways you might not be used to, since you’ll be responsible for selling franchises and supporting franchisees rather than running the company like you used to.

Protecting the brand

Following on from the importance of brand identity, it’s imperative that you protect the brand at all costs. As a franchisor, it’s your most valuable asset, and represents your culture and attitude. When you create a franchise, it means new people will be representing the brand that you’ve lovingly built.  

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As a result, you need to have clear guidelines for the use of your brand assets to ensure messaging stays consistent, even if it means getting your prior approval before doing so. Your business’ intellectual property should be protected anyway, but just in case it isn’t, be sure to read up on how you can keep things ironclad moving forward.

Make the right decisions about your business model

A successful business plan is something every organisation needs. Making the move into franchising requires you to make similarly important decisions regarding how you’ll operate. Many of the decisions to be made will affect future profitability so it’s vital that the necessary time is spent on making the right decisions.

In reaching a decision, you might consider some of the following:

  • The franchise fee and royalty percentage
  • The term of your franchise agreement
  • The size of the territories awarded to each franchisee
  • The type and length of training programme you will offer
  • Whether franchisees must buy products or equipment from your company
  • The business experience franchisees need
  • Your approach to marketing the franchises
  • Whether you want an owner-operator for each unit or area/master franchisees who will develop multiple units

When it comes to royalties, for instance, the difference between 5 and 6% doesn’t sound that much. But down the line you might have sold 100 franchises at a lower percentage on a 10-year contract; that’s a big sum of money you could lose out on.

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Geographic variables like weather can affect franchisees’ success, while territory size is important too; those that are too big might have to be bought back later at a premium so they can be split up. And if you aren’t prepared to funnel the appropriate amount into training, then your franchisees may be ill-equipped to implement your system successfully.


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Screen and hire franchises

After registering as a franchisor, people might start showing interest in opening a franchise with your company’s branding. However, that doesn’t always mean you should let them. Since these people will be representing your brand, it’s vital that you have a system in place to make sure they’re an appropriate fit for the company.

 Don’t be tempted to sell to anyone and everyone. There’ll likely be plenty of enthusiasm, from both you as a franchisor and potential franchisees, but it’s important not to be swayed so easily from the start. While enthusiasm and passion have their plus points, look to the credentials, documents and financial information of those who are showing interest in you as a franchise.

Young employees shake hands and smile in office with two colleagues

When you’ve selected the right people, it’s important to give them specific instructions on hiring, training and other practices. As you as a franchisor take a step back from daily operations, you’ll have to increasingly rely on your franchisees’ judgments. Giving them a certain amount of freedom to work within is key here. There’s a need to achieve a balance between your brand identity and their own approach as a franchise owner; you have to determine how this will develop.

Support franchises

Although you’ll be taking a step back from the daily business of your franchises, it’s wise to spend the appropriate amount of time getting to know and support the franchisees. If you’ve put training programmes and other support in place, then there’ll be more consistent quality control and customer experience across franchises.

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The views, opinions and positions expressed within this article are those of our third-party content providers alone and do not represent those of Gazprom Energy. The accuracy, completeness and validity of any statements made within this article are not guaranteed. Gazprom Energy accepts no liability for any errors, omissions or representations.


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