How to prepare for a journey down the franchise route

Franchising is a popular business model choice for estate agents. In September this year, Dacre Son & Hartley announced it was seeking to expand its network this way, while Bournemouth-based Martin & Co has a network of around 200 franchisee-run offices across the UK - a figure which is set to grow after its £6 million deal to buy chains including Parkers and CJ Hole.

If you're thinking of going down the franchising route, what do you need to consider and how can you properly prepare for such a venture

The benefits

If you've established a successful business in one particular area, perhaps with several offices, and you want to expand further afield but you don't have the resources to do so, franchising could be a good option.

Not only will you benefit from the capital investment and fees paid by your franchisees, you can also make the most of their vested interest in the brand. It is ultimately their determination and motivation in making the franchise a success which will help you grow, without you having to manage and monitor every step and decision. What's more, your franchisees' local knowledge will prove invaluable in setting up offices in new areas.

Key considerations

It's important to have a level of trust in your franchisees. While you can guide the way they operate, you can't manage them as closely as you can direct employees. You will have a level of protection to ensure they don't exploit your business name or brand though through your franchise agreement.

As each franchisee will be focused on their own profits and success, you may find it difficult to encourage franchisees to work together - even if it could well be in their interest.

Further, first time franchisees may have limited business experience. Although you can provide a certain level of support and training on the business, ultimately it is up to them to make a success of their own office. If they find it a struggle or it is more difficult than they first anticipated this could lead to problems down the line. A failed franchise could also cost your business in terms of reputation.

First steps

If you are confident you have a business model that you can successfully franchise, you will need to take detailed legal advice at the outset. A solicitor will be able to advise you on protecting your intellectual property rights and help you draw up a comprehensive franchise contract. This will set out the obligations of both the franchisor and the franchisee, from fees and mark-ups to marketing and services.

To help maintain a consistent level of service across all franchisees, you should create operation and training manuals and programmes. These will lay out your expectations and ensure everyone entering your network understands your expectations and requirements about how they will need to operate their business.

Before diving head first into the franchising pool, it is a good idea to run a pilot operation to test the franchise. This will identify any problem areas and give you the opportunity to refine your strategy and plan before you roll it out further.

Help and support

After implementing a franchising model, one of the challenges you are likely to face is letting your franchisees get on with their work while keeping a general overview of what is going on to ensure they are sticking to their side of the agreement and not damaging your brand in any way. Identifying issues early on makes it more likely you will be able to resolve these before they become problematic and potentially threaten the franchise arrangement.

Sometimes issues can be fixed by having a conversation with the franchisee or by providing informative and detailed training. Even small issues should be recorded, along with details of how these were resolved - just in case they arise again in the future, or become more serious. For bigger challenges, it is always advisable to speak to your solicitor. The British Franchise Association also offers a wealth of good information and advice.

*Stuart Stones is a Partner at Ratio Law, a firm specialising in property, landlord and tenant law