Items to consider before franchising your restaurant

Franchise lawyers regularly get calls from business owners who are considering taking the step of franchising for the first time, and are asked that very question. While we are specialists within the industry, and have a unique perspective as a result, lawyers must take care to not cross the line into business advisors where it isn’t appropriate to do so.

That being said, there are a few general pointers which you should bear in mind when exploring whether your restaurant is one that is ready to be franchised. First among those is whether your business can be replicated. You may have experienced success in one or a small handful of your restaurants, but do you have a model in place which can be emulated? If you hand someone the keys to your brand, is your prototype capable of being imitated?

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If your model is so unique, your products so proprietary or your methods of service so technical that they cannot be performed to your standard by another restaurant owner, franchising may not be for you.

And don’t be guided by flattery – just because someone has noticed all the great work you’re doing and wants to borrow your brand so they can open their own restaurant under the same name doesn’t mean it’s a good idea. Be sure you are ready to provide the support that’s needed to be a successful franchisor. When you become a franchisor, you’re no longer in the business of running a restaurant – you’re in the business of selling and supporting franchisees.  Be comfortable with that distinction before getting ahead of yourself. It’s usually a good idea to have a handful of corporate restaurants operating beforehand so that you’re more familiar with the cornucopia of issues which a franchisee might be likely to encounter.

You should also consider whether you are even comfortable with licensing your brand at all.  Franchising is based on the operation of uniform and consistent businesses so that customers can expect to receive the same quality of services regardless of which unit under the franchise umbrella they are patrons of. But your vision, for better or worse, may not always be the one that is executed. Without your day-to-day supervision of operations, you’ll need to be prepared as a franchisor that, in spite of your best efforts to exercise a reasonable degree of control to maintain your standards, you will need to learn to accept variances, also for better or worse, to your brand template.

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Be sure to ask yourself where you will find your franchisees, and whether you are prepared to devote the resources to recruitment, marketing, development, training and, perhaps most importantly, support which any franchisor needs to do. Never forget that in exchange for the considerable initial franchise fee your franchisees might be paying you, they will be looking to you as a first source for all of those attributes and offerings.

As a licensor of your name, logo and brand in general, be sure that your intellectual property is protected and your trade-marks applied for, if not registered. You certainly don’t want to be in the position of franchising a system of restaurants only to learn that everybody has to change their names because it infringes on someone else’s rights.

Of course, this is only a cursory list of the considerations which go into preparing for franchising as a method of expansion. Be sure to discuss these and other options with your legal, business and financial advisors.

Author

Chad Finkelstein is a franchise lawyer at Dale & Lessmann LLP (www.dalelessmann.com) in Toronto and can be reached at cfinkelstein@dalelessmann.com or (416) 369-7883.