Use intellectual property to grow your business

Franchising is a popular way to grow a business. It allows you to expand into new markets, increase revenue and scale your operations in a cost-effective way. It can also help you enter new markets quickly and build a competitive advantage.

How franchising works

In a franchising model, you allow another business (the franchisee) to sell your products or services under your brand. The franchisee uses your intellectual property (IP), including trade marks, copyright, know-how and your business model. In return, they typically pay:

• an initial franchise fee
• ongoing royalties (usually a percentage of sales or profits)

You may also earn income by supplying products or services to your franchisees. As the franchisor, you usually provide training, guidance and ongoing support.

Advantages of franchising for growth

Franchising offers several benefits, including:

• predictable income from fees and royalties
• lower financial risk, as franchisees fund their own operations 
• reduced management costs, as franchisees run their own businesses
• faster expansion into new markets

Disadvantages of franchising for growth

Since franchisees are separate businesses in their own right, certain risks need to be considered. For example:

• less control over how your brand is used
• potential reputational risk if franchisees perform poorly
• reliance on independent businesses to maintain quality standards

It is important to weigh these risks and consider the full advantages and disadvantages of franchising your business.

How to negotiate a franchise agreement

A written franchise agreement is essential. It should clearly define:

• the territory covered by the franchise
• whether the agreement is exclusive or non-exclusive
• the rights to use your intellectual property
• any restrictions on the franchisee’s activities
• the support you will provide
• fees and royalty payments
• the length of the agreement
• renewal and termination condition

Read more about the key issues in the franchise agreement for a franchisor.

Choosing the right franchisee

Select franchisees carefully to protect your brand and maximise growth. Look for partners who understand your business model, have relevant experience or market knowledge, and can maintain your standards and reputation.