If you have a successful business then chances are one way to grow it could be through Franchising.

In this article we want to cover some of the key points that you need to know if you want to head down that path.

Franchising is a good alternative to consider because it can increase your brand recognition and you provide oversight while not actually running the branch. However, you can still benefit from payments and the exposure that a growing brand creates.

So what do you need to consider?

In helping our clients franchise we work closely to look at the following – working through these points below we would then put into a Franchise Agreement and Manual. Your answers will likely depend on the amount of control you want to have over the Franchisee’s business. The Manual will outline the rules and guidelines for operating a Franchisee Business. What you need to think through is the following:

  • The Territory the Franchisee can act in (eg. Canterbury vs Ashburton)
  • Opening hours
  • Advertising
    • Who is responsible for doing this
    • How will it to be done
    • National or regional level?
  • Training course
    • Additional/on-going training?
  • Number of employees
    • Roles – Manager etc.
  • Minimum sales/performance criteria required for Franchisor to terminate agreement or revise territory
  • Inventory and supply specifications
  • Reporting
    • How often?
    • What form?
  • Grounds for terminating the Franchise agreement
  • Restraint of Trade terms (e.g. relating to termination, territory, goodwill etc.)
  • Insurance cover
  • Set up
    • Conversions/Alterations/renovations required to initially set up premises
    • Plans/drawings/specifications of the premises
    • Fixtures, fittings etc.
    • Initial stock required
    • Initial advertising required
    • Initial equipment provided by Franchisor
  • Continuing obligations
    • How often will franchisor consult with Franchisee
    • How will performance be monitored
    • How will records be kept
    • Code of Practice? (if member of Franchise Association of New Zealand)
  • Suppliers/Key Contracts needed
  • Stationery
  • Leases
  • Requirements for where shops are located
  • Intellectual Property – this will include considering:
    • Exactly what the Company has as IP
    • Whether trade marks are registered
    • How trade marks can be used
    • Licenses that may be in place
    • Providing clear brand guidelines

Franchising is a definite option for a growing business.

If you would like input on franchising then we would be happy to provide you with input through an initial conversation about what you want to achieve. To discuss this  or for further enquires please contact Steven Moe at stevenmoe@parryfield.com or on 021 761 292, Kris Morrison at krismorrison@parryfield.com or Aislinn Molloy at AislinnMolloy@parryfield.com.

You might also appreciate our guides such as the Doing Business in New Zealand guide and the Start-ups Legal Toolkit. We also provide free templates for resolutions, Non Disclosure Agreements and other resources on our site as well as many articles on key topics you should know about.