Growing a franchise

There are several important issues to take into account before growing a franchise, such as funding, potential structural changes and the process of due diligence. You should involve your franchisor in all decisions and make sure you have their approval before going ahead.

Expanding a franchise usually involves increasing the areas in which the business operates, which will probably involve payment to the franchisor, or to the holder of an existing franchise you want to take over.

If you're going to grow your business by acquiring an existing franchise, you will need to look at the new business in detail and undergo the process of due diligence. Apart from checking the financial condition of the business, you will need to assess its growth potential, where you can make improvements or efficiencies, and how you can protect yourself and your existing business from any liabilities.

Due diligence can be an extremely complex process and you may benefit from getting professional help from financial advisers, auditors, or a specialist acquisitions consultant.

Find out about other things to consider when you're thinking about growing your business.

Advantages

The main reason for wanting to grow your franchise - apart from the satisfaction of building up your business - is that you should become financially better off. Additional sales lead to additional profit and if you retain this in the business, your franchise will be a saleable asset in the future.

If you grow through acquisition and buy an existing franchise, you have the benefit of acquiring a business that is already established. This means you will not have to pay start-up costs or raise finances to acquire new premises.

A larger business is more secure and additional turnover and profit can provide access to better deals for office equipment, vehicles and other business purchases. You should also be able to tap into existing market information to facilitate the growth of the business and boost turnover and profit.

Disadvantages

If you're happy with your business as it is, and you can foresee a reasonably successful future, you may not wish to grow.

Although a bigger business can make more money, mistakes can be more costly and you may face increased pressure and stress.

You must also check that your franchisor is happy for you to expand and that there are no restrictions in your franchise agreement - otherwise you could be putting this in jeopardy. You may want to get specialist advice from a solicitor who is accredited by the British Franchise Association.

Expanding a franchise business is a major step to take, so you may want to get additional support and advice

The British Franchise Association (bfa) is a voluntary, self-regulating body forUK franchising businesses. The association provides a range of information, including links to franchisors and professional advisers.

Your local Chamber of Commerce can provide support and advice, as well as networking meetings for businesses of a similar size and in similar business sectors.

The trade association for your business sector can also offer advice on expanding your business.

Business Gateway can give you advice on growing your business. Call us on 0300 013 4753.