Franchise formats: choose your model before expanding

Turning a business into a franchise means choosing exactly what you will offer prospective franchisees. A full-sized shop, a kiosk and a mobile operation may share the same brand, but they do not necessarily deliver the same experience or require the same resources. In franchising, defining the format before starting to expand helps avoid improvised adaptations and expectations that do not match the realities of the business.

1. Define the format by what it delivers, not just its size

A franchise format combines physical premises, products or services, customer capacity and the way work is organised. Reducing the floor area of the original outlet is not enough to create a compact version: you need to check which activities remain possible and which can no longer be carried out.

Start by identifying the brand’s core offering. In a coffee shop, for example, this might include freshly prepared drinks, food and a space where customers can spend time. A kiosk may be able to retain the drinks and some of the food, but not the sit-in experience. That difference needs to be acknowledged in the design, rather than hidden in the sales presentation.

Prepare a specification sheet for each format under consideration, covering:

• Products and services included and excluded.
• Processes carried out at the outlet and activities handled elsewhere.
• Essential equipment and storage requirements.
• Customer capacity and key limitations.
• Roles needed during each part of the working day.

The format must have a clearly defined operating model. If its description constantly relies on “we will work that out depending on the location”, too many decisions remain unresolved to offer a consistent franchise proposition.

2. Identify what changes in a compact version

A smaller model may need fewer facilities, but it can also create new costs or dependencies. Having no kitchen, for example, may increase reliance on products prepared by suppliers. Holding less stock may require more frequent deliveries. A smaller team may limit opening hours or make it harder to cover absences.

Compare the proposed format with the existing operation in four areas: workflow, supply, customer service and capacity. For each change, record the practical implications and who will be responsible for addressing them.

Avoid assuming that a compact format’s costs and sales will be proportional to its floor area. Some equipment remains essential; certain tasks require the same number of people; and a narrower product range may change purchasing behaviour.

Also distinguish cosmetic adaptations from structural changes. Changing finishes is not the same as removing a production stage. If a change affects how the product or service is delivered, treat it as an assumption that needs operational testing, not simply as a design option.

3. Start with a scope you can support

Offering several formats may seem to open up more opportunities for expansion. However, each version may need its own designs, guidance, training and ongoing support. For a business just starting to franchise, that variety can exhaust its support capacity before it has even built a network.

Choose the first format based on what is already understood and can be demonstrated. Ask:

• Can the team explain how this operation works from start to finish?
• Is there evidence to support the proposed premises, equipment and staffing requirements?
• Can suppliers serve the proposed set-up?
• Can the support team advise on this model without continually relying on the founder?

If the answers are weak, narrow the scope of the offering. It is more prudent to start with one well-defined set-up than to announce several versions whose operation still depends on solutions yet to be developed.

Set limits on adaptation too: which components are mandatory, which may vary and which changes require a fresh assessment. This prevents each sales negotiation from effectively creating a different format.

4. Reflect your choice in the offer and the contract

In Brazil, Law No. 13,966/2019, known as the Franchise Law, governs franchising. Article 2 requires the Circular de Oferta de Franquia (COF), Brazil’s franchise disclosure document, to provide a detailed description of the franchise and a general description of the business and the franchisee’s activities. It also requires information on the initial investment, premises, equipment and opening stock.

This information must correspond to the format being offered. Do not present the investment required for a kiosk alongside images, capacity figures or results from a full-sized shop without clearly explaining the differences. The sales presentation, COF and contract must describe a consistent proposition.

The COF must be delivered at least ten days before the contract or preliminary agreement is signed, or before any fee is paid to the franchisor or to any person or company connected with it. Plan to finalise the format before this point, and have the documents legally reviewed.

In practice: before selling your first franchise, finalise a format specification sheet, record its limitations and check that the entire offering describes the same operation.