Building a franchise network: integrating existing businesses safely

Turning your successful business into a franchise network does not have to mean relying solely on new openings. Established businesses can join too. This approach, known as conversion franchising, brings experience, staff and an existing customer base — but also existing obligations. A planned transition is therefore essential: what stays, what needs to change, and when can the business begin trading under the shared brand?

1. Identify the right business to convert

In conversion franchising, an existing business adopts the franchisor’s brand, business concept and standards while remaining legally independent. For prospective franchisors, this is a distinct route to expansion, not simply a new opening with a shorter preparation period.

Start by defining which types of existing business your concept can accommodate. A similar product range is not enough. What matters is whether service delivery, equipment and customer commitments are compatible with your proven model.

In particular, assess:

• Products and services: Which existing offerings fit the concept, and which would need to be discontinued?
• Operating processes: Can your standards be implemented using the existing premises and equipment?
• Customer base: Do existing customers expect services that your brand does not offer?
• Staff: What additional knowledge and skills does the existing team need?
• Brand presentation: How extensively will the fit-out, signage and online presence need to change?

Also record which differences you are prepared to allow permanently. Too many individual exceptions can turn a replicable concept into a collection of businesses that are difficult to support. The first conversion should therefore be deliberately organised as a learning project, rather than treated as a template for immediate, rapid expansion.

2. Record existing obligations before changing the brand

A new sign does not terminate existing contracts. If the legal entity remains the same, its obligations generally continue. Joining a franchise network does not automatically transfer them to the franchisor.

Draw up an inventory with the prospective partner. This should include tenancy and equipment lease agreements, binding supply arrangements, maintenance contracts, software licences and customer orders already accepted. Vouchers, advance payments, subscriptions and earlier service commitments may also affect the transition.

For each item, record four details: the contracting party, the term or termination options, any conflict with the new concept, and the proposed solution. Also flag whether a third party’s consent is required. For example, the tenancy agreement may require consultation with the landlord before new external signage is installed.

Clear communication with customers is particularly important. Will existing vouchers still be honoured? Who will handle complaints about services provided before the change? Which offerings will end? The answers need legal review and must be presented in a way that staff can understand. Avoid statements that inadvertently suggest that head office is taking on all previous obligations.

Practical rule: No unresolved existing contract should enter the conversion plan with nothing more than a note saying “resolve after opening”.

3. Agree a binding conversion plan

Germany has no dedicated franchise law or specific government franchise registration scheme. The key legislation includes the German Civil Code (BGB), the German Commercial Code (HGB), where applicable, and German and EU competition law. Pre-contractual disclosure duties arise from the general provisions of the BGB, particularly sections 311(2) and 241(2), and the principle of good faith under section 242. Standard contract terms are subject to review under sections 305–310 of the BGB.

The European Code of Ethics for Franchising, by contrast, is a self-regulatory instrument, not German law. Among other things, it requires the concept to have been tested beforehand. Bringing an existing business into the network is no substitute for that testing.

Have a tailored conversion plan legally reviewed to ensure it is consistent with the franchise agreement. It should specify:

• which measures must be completed before the business starts trading under the brand;
• which temporary arrangements are permitted, and for how long;
• who will organise the measures and bear the costs;
• when rights of use, support and fees begin;
• what happens if there are delays or conditions are not met.

Ongoing obligations should not be buried in a non-binding project checklist. Equally, there is no need to overload the contract with every minor organisational detail. Clear responsibilities and consistent documentation are what matter.

4. Manage the change while the business keeps trading

Plan the conversion backwards from the intended brand launch date. Schedule technical changes, material deliveries, staff training and customer communications so that they work together. A publicly announced launch date should not force you to proceed when essential requirements have not been met.

Set verifiable go-ahead criteria: do the required systems work? Are the new materials available? Can the team deliver the core services to your standards? Is responsibility for outstanding customer orders clearly assigned? Document any remaining deviations, along with the people responsible and completion deadlines.

Allow for the additional pressures of the transition too. Refurbishment, reduced opening hours, duplicate software costs or materials that can no longer be used may all create extra expenditure. These need to be included in a separate conversion plan rather than obscured within the usual costs of a new opening.

After the change, review which assumptions proved correct and what additional work was needed. This will turn the first integration into a dependable process for future members of your franchise network.

Practical takeaway: Start with an inventory of existing obligations, a legally reviewed conversion plan and clear go-ahead criteria. The brand change is only truly successful when existing commitments and new standards work together in day-to-day operations.