Analysis of the pros and cons of the franchise and comparison with other growth options.

Analysis of attitudes

  • Quality and professional management.
  • Willingness to consider franchisees as business partners.
  • Willingness to accept the advice and the opinions of specialised professionals, etc.

Analysis of the franchisability of the business

  • Existence of your own know-how.
  • Facility for transmitting it to the franchisee.
  • Arguments in favour of participating in the business (profitability, other advantages).

Market study

  • Estimate of expenses and market study.
  • Estimate of expenses and budgets required (Market studies, planning and development, professional services, marketing, staff selection, training, etc).

The income from the franchisee’s payments (fees) should be realistic, with sufficient compensation for both parties, the franchisor and the franchisee.

Creation of one or more pilot outlets and an analysis of the results
An essential condition for setting up a successful franchise network is to have a successfully established, well-managed and capitalised business that lends itself to the “cloning”process.


Preparation of the franchise package. This should include:

A. A presentation dossier or a franchise dossier
General information about the basic characteristics of the franchise.
Aimed at potential franchisees interested in the above.

B. Corporate Identity Rules
These regulate the use of the brand name, and its application in the different forms of back-up (signs, leaflets, staff uniforms, etc.) This is important to maintain coherence in the company image.

C. Decoration manual

D. Manual for operations and internal organisation
Exhaustive information on the procedures and operation of the business (product, manufacture, sales, management, accountancy, publicity, etc). It is essential for this manual to contain everything that the franchisee needs to know to manage his business. This is an important factor for success.

E. Franchise Contract
The legal framework which establishes the relationship between the franchisor and his network of franchisees. This should cover, essentially:

  • Rights and obligations of the franchisor and the franchisee.
  • Products and/or services provided by the franchiser.
  • Financial payments in the form of fees and conditions for settlement.
  • Term of contract and renewal conditions.
  • Description of territorial range of operation.
  • The franchisor’s control systems for the franchisee.
  • Conditions under which the franchisee can sell or transfer the business.
  • Conditions for the use of the brand name, the signs, etc.
  • Grounds for cancelling the contract.

Business Plan
Work out the most suitable financial structure for the expansion.

Creation of the necessary structure to build up and manage the network

  • Administrative and management structure (Franchise director, back up staff).
  • Selection and training of franchisees.
  • Technical and commercial assistance for the franchisees.
  • Search for and selection of sites to set up sales outlets.
  • Acquisition and supply of initial stocks and equipment for the outlets.

The correct selection of the franchisees and the situation of the sales outlets are vital to guarantee the profits and the continuity of the network.


Opening of the first outlets

  • Specific assistance for the franchisees in setting up the business.
  • Promotion, locally, for each of the new sales outlets.
  • On-going promotion of the brand image.
  • Continuous improvement of products and/ or services with a view to satisfying market demands.

See also…

Starting a Business