Bird & Bird: On Franchising Your Wellness Business

For small and medium-sized wellness companies looking to expand their business both within the UK and internationally, franchising presents a growth strategy which is less capital-intensive than corporate expansion and allows for faster entry into new markets.

But like any business model, before choosing if it’s right for your brand, first you need to examine how your company might fit into this type of structure, and what opportunities it could create.

As experts in these type of strategic commercial issues, International law firm Bird & Bird LLP understand both the challenges involved in the franchising model, as well as the many benefits.

Using their legal expertise and deep industry knowledge to help clients achieve their commercial goals daily, Graeme Payne, Partner specialising in franchising & James Fowler, trainee at Bird & Bird have unparalleled insight when it comes to the franchising model.

Here the duo share their knowledge to guide you through the franchising model and how it could help accelerate your wellness business.

What is franchising?

Put simply, franchising involves the grant of a licence by the franchisor to a franchisee, enabling the franchisee to run its own business using the franchisor’s brand, know-how and business format.

As a business owner looking to expand, you would be the franchisor, and the people you recruit would be the franchisees.

During the course of the relationship your franchisees will pay royalties to you, and you will provide support to, and exercise quality control over your franchisees.

Is my business suitable to franchise?

Franchising could be the appropriate business model for you if you have a business format that is well-established and already has a proven track record of success.

However, the blueprint should be simple with a clear operating system that is easy to replicate.

You must also own and have the right to use a distinct brand name and identity, which can then be licensed to franchisees.

What are the benefits?

The principal benefit of the franchise model is that franchisees use their own capital to establish their franchise business, and thereafter to operate it on a day-to-day basis.

Reduced capital requirements mean that you can typically grow your brand and footprint faster than if you were to adopt a corporate expansion strategy.

And as owners of and investors in a franchise business, franchisees will have a financial incentive to achieve high performance, as their remuneration will be linked to the success and profitability of their franchise.

The franchising model also allows companies to exploit more easily opportunities in geographic areas which are currently beyond their reach by creating a network of partners on the ground; and tapping into their knowledge of and involvement in local markets.

Additionally, franchising offers benefits for franchisees too, as it provides them with the opportunity to start and run their own business with an established brand and a proven business format, with the security of on-going training and support from the franchisor.

Operating a franchise business may also prove more profitable for a franchisee than going it alone.

Since franchisees can leverage the economy of scale of the franchise network, as well as the purchasing power of the franchisor, whilst benefitting, for example, from investment by the franchisor in advertising and new product development initiatives.

What challenges might I face, and how can I tackle them?

Loss of complete control is inherent in the sharing of your brand and business format with third parties.

A franchisee who acts outside the rules of your franchise or one that provides a sub-standard service to customers, may damage your brand’s reputation and diminish the value of your trademarks.

It is therefore imperative to develop a rigorous recruitment process to ensure you recruit the right franchisees, an initial and on-going training programme, and a comprehensive operations manual setting out strict brand guidelines and instructions for the operation of the business.

However, in disclosing your business know-how to a franchisee and assisting them in running a replica operation of your business there is a risk that you may ultimately be training a potential future competitor.

Though contractual non-compete provisions will mitigate this risk during the life of the relationship and for a period thereafter, it is important to foster a positive working relationship with franchisees, which should be based on mutual trust.

Good franchise businesses continue to evolve and adapt and engage with their franchise networks, thereby ensuring that franchisees do not break away and attempt to do it themselves.

But overall, If you have an established brand and a proven, replicable business format, franchising poses an attractive alternative to corporate growth, offering a potentially more efficient and cost-effective means of expansion.