How to Franchise Your Service Business

If you currently run a service-based business and it has performed well over time with a proven business model, you may now be thinking about business expansion. One option you have is franchising. But with this comes the question of how to franchise a service business. Especially since service franchising, and franchising in general, are a great way to scale a business.

With this in mind, we’ve prepared this post to help you understand the advantages and disadvantages of turning your business into a franchise as well as the main steps to follow when doing so. Read on to find out more.

Advantages and disadvantages of franchising your service business

There will always be positives and negatives to any business expansion efforts that you pursue. However, franchising offers more advantages than disadvantages. Below, we’ve summarised the main ones to help you see where you stand before making the big decision of how to franchise a business.

Advantages

• Much lower entry cost than retail franchises
• The income potential is attractive and considerable
• Lower upfront risks from day one
• You have many service-based opportunities to choose from
• There is a healthy demand for service-based businesses
• They can appeal to people with the right skill set, ability and knowledge
• Overheads are typically lower because they’re not brick and mortar based
• These businesses generally require fewer employees and your payroll costs can be lower
• Adding additional territories later on can be done with a minimal cost
• You can enjoy flexible working hours and a greater work-life balance

Disadvantages

• Customer and transaction volume can be lower when compared to retail franchises
• Territories can be restrictive and limiting
• You may have to juggle many responsibilities at once
• You require technical knowledge, certification and continuing education (e.g. electricians, plumbers, cleaners)

How to develop a franchise on a service-based business

Having weighed up the pros and cons of franchising your service-based business and you’re sure it’s the right step for you, the next question you may have is what should I consider before I franchise my small local business? Below are some of the most important steps to follow.

1. Consider branching out into a few territories before franchising

As your starting point, you may wish to test the waters by first opening up a few branches of your business in several different locations. This way you can prove the profitability and the success of the business model of your service business first before presenting it to prospective franchisees as well as investors.

If you are wondering whether your service business is franchisable or not, we recommend checking out our detailed checklist:

2. Carry out market research

Even though your local business may be successful, business growth necessarily involves stepping up and entering new territories with the same business concept.

As such, it’s critical to study new areas that you’d like to expand your business into by looking at the local demographics, customer demand and other factors to determine if the business idea can be successfully replicated in these new locations.

3. Calculate the costs involved

Franchising your service-based business may be a great idea, but it’s always good when that idea is supported by financials and numbers. This means deciding how much you’re willing to spend on training new franchisees and what kind of support you’ll offer them over the long term.

Ask yourself the following questions:

• Will there be a need for equipment such as vans and tools?
• What about the marketing and advertising costs?
• What amount of royalties will you charge your prospective franchisees?
• How will you calculate this amount based on realistic expectations?

Having the answers to these questions is crucial as you get started.

4. Register your trademarks

Your intangible assets such as your brand, name, logos, company colours and more are an integral part of your business’ identity. Since franchising necessarily involves enabling third parties to use your brand in a consistent manner, you need to ensure that your intellectual property is registered and protected sufficiently well so that you don’t encounter problems further down the road.

5. Establish your franchise company

During step four, you need to actively change the structure of your business from what it currently is to a franchise. This means ensuring that all the legal requirements have been met and that you are registered and accurately represented before the relevant industry and regulatory bodies as a franchise service business.

6. Prepare your documentation

After you have created the new business vehicle – namely, your service-based franchise, you will need to put together all the necessary documentation to enable future and prospective franchisees to follow your business model to a “T”. 

This necessitates the need for a franchise agreement and a detailed operations manual as your starting point. However, when it comes to initial and ongoing training, you will need training materials, too. 

Further to this, you will also need marketing materials which your franchisees will be able to utilise when marketing their services in their own territories. You also need hiring procedures and practices, reports that prove your business’ profitability, etc. 

There needs to be consistency in your approach across each and every franchisee. Remember that you need to be completely fair and transparent when ensuring that every franchisee gets what you promised, what they need and in a consistent manner.

7. Create a business plan

The purpose of the business plan is to ensure that you can approach lenders for some financial assistance, which you calculated the costs of in step three above. This is a detailed document that lays out all the crucial information that a prospective lender will need in order to decide whether to back your endeavours or not.

Here, you’ll want to provide an overview of the business, the markets you intend to target and operate in, how quickly you are willing to expand, what price structure you will follow and any other details that will help them make an informed decision.

8. Market your franchise opportunity

You’ve lined all your ducks in a row and you’re ready to expand. But this needs to be followed by a franchise marketing plan and strategy.

You may need to create a special website for franchise recruitment, have a team on stand-by to vet prospective franchisees, have all the details and information that they will need to reach a decision and choose your franchise business over others and so much more.

And don’t forget to build your franchise buyer persona – your ideal franchisee – as it will help you target and drive the right audience. Meanwhile, if this concept should foreign to you, you can always take advantage of our ideal franchise buyer persona template:

In conclusion

Service-based businesses are well-positioned to expand and grow through franchising. And having looked at the advantages which outweigh the disadvantages, it’s certainly a move worth considering. 

The next steps to follow may sound complicated but they should be an essential part of your business expansion journey. 

Skipping any one of them can be detrimental to your scaling efforts and it’s highly recommended that you inform yourself as much as possible before making this big decision.

And if you need help along the way with your franchise development, Franchise Fame is here to assist you in your efforts. With our extensive range of custom marketing services, we can help you manage your presence and brand consistency online, attract high-quality leads, and monitor the performance of your marketing efforts while you dedicate yourself to other business operations.