How do I Franchise my Business? 1 year ago

When a business starts earning and eventually grows, entrepreneurs would begin thinking of strategic ways to scale up their business–others expand, while those involved in services usually franchise. 

What is franchising?

A franchise (or franchising) is a method of selling goods or services that involves a franchisor who creates the brand's trade name and business model and a franchisee who pays a royalty and often an upfront fee to have the right to use the franchisor's name and system.

How to start a Franchise?

There are no pertinent laws or specific requirements here in the Philippines before a business can enter commercial franchising. There are also no particular regulatory agencies that enforce franchise rules. As a result, the franchising industry has continued to thrive, you may get in touch with the Philippine Franchise Association to learn about franchising.

Anyone can start a franchise. And, as a franchisor, it will be your responsibility to lay out everything your franchise will need. 

Here are the following items you need to secure before franchising your business:

1. Business Registration

Before you can even expand your business into a franchise, make sure you have all legal documents laid out to ensure that your business can operate legally. Make sure to update or register your business with the appropriate agency, like the Department of Trade and Industry (DTI) or the Securities and Exchange Commission (SEC). 

You may check Digest.ph to find resources on registering your business.

2. Business model

Before franchising a business, establish a standardized business model that each new franchisee will likely replicate. You must understand the costs associated with replicating the business model because you must include an operations manual, training program, quality standards, and management rules–it will guide your franchisee from training employees to how the entire business will operate. 

3. Trademark

Included in your franchising business model are details on what you will offer to your franchisee in terms of legal rights, trademarks, branding, training, right-to-use packaging, and other forms of support. Therefore, before starting your franchise, apply for appropriate trademarks and any additional required legal protection for your branding to prevent losing them throughout your franchise and avoid dealing with lawsuits.

4. Financial Plan

Like any investor, your franchisee is most likely to expect their return on investment (ROI). Be sure that when you start a franchise, you include a financial plan to present your previous business performance and what your franchisee can expect once they agree to franchise your business.  

Read here the 9 Financial Things that investors are considering before investing.

5. Franchise Agreement

Because of the lack of regulations for franchising, one of the important things you should secure is a franchise agreement, which is a legally binding contract that outlines all of the obligations and expectations between all parties, protecting both the franchisor and the franchisee. This may include but is not limited to the following:

1. Identity of the franchisor and the franchisee

2. Location

3. Training programs

4. Duration of the franchise

5. Franchise fee or initial investment

6. Royalties and other fees

7. Franchisee obligations

8. Rights to distribute products (trademarks, patents etc.)

9. Legal Compliance

10. Renewal or termination process

While franchising can be a great way to expand for many businesses, it is not always the most appropriate course of action, nor is it a guarantee of success. It is still essential to assess if your business is ready to expand and if franchising is your best strategy. 

Should you decide that it is time for your business to open a franchise, you may contact our legal experts to help you with your venture.