Franchising: bringing existing businesses into your network

If you run an established business and want to develop a franchise network, you may encounter entrepreneurs who want to bring an existing outlet into it. This is not simply an easier way to open a franchise: existing customers, contracts, working practices and investments must all be reconciled with your business model. Before proposing a rebrand, you need a conversion process that distinguishes what can be retained from what must change.

1. Assess the gap between the existing business and your model

The first question is not ‘How much does this shop sell?’ but ‘How much needs to change for it to deliver on our brand promise?’ A profitable business may be a poor fit for your model, while a well-organised but commercially weak outlet could benefit from the new proposition without needing a complete overhaul.

Prepare a comparison checklist covering:

• the current product range or services and those required by your model;
• how customers are welcomed, served and supported;
• work organisation and available skills;
• equipment, fixtures and fittings, and management systems that can be reused;
• existing contracts that could hinder the transition.

For each difference, specify an action, a person responsible and a completion criterion. Distinguish the essentials of your brand identity from purely cosmetic choices: replacing everything indiscriminately can increase the investment without improving the customer experience.

The assessment should lead to an explicit decision: conversion is viable, viable subject to conditions, or not viable. Do not let a strong commercial incentive become a permanent exemption from the essential elements of your model.

2. Calculate the full cost of the transition, not just the fit-out

Existing business owners tend to consider only the new signage, any additional fixtures and fittings, and the initial franchise fee. The true cost also includes moving away from the previous model and any interruption to revenue.

Prepare a dedicated transition budget, separate from the regular profit and loss account. Where relevant, include refurbishment work, training during working hours, disposal of incompatible stock, data migration, customer communications and any costs of terminating existing contracts. Also assess cash requirements during any closure or period of reduced operation.

Stock is not readily available cash. Check quantities, condition, expiry dates and realistic prospects of sale. If you plan a sell-through period, establish which products can remain and how to avoid confusion with the new range.

Compare at least two approaches: conversion involving a temporary closure and a phased transition. For each, consider lost revenue, duplicated costs and the risk of service disruption. The apparently cheaper option may become more expensive if it prolongs uncertainty for staff and customers.

3. Clarify the legal changes before signing

In Italy, bringing an existing business into a franchise network remains subject to Law No. 129 of 6 May 2004, governing commercial franchising. Conversion does not exempt the franchisor from having market-tested its business model or from the requirement for a written contract, without which the agreement is void.

Article 4 requires prospective franchisees to receive a complete copy of the contract and the supporting documents required by law at least thirty days before signing, subject to the exceptions expressly provided for specific confidentiality needs. The fact that a candidate is an experienced entrepreneur does not remove this protection.

You must also distinguish joining a franchise from a transfer of the business: a change of signage does not, in itself, transfer existing contracts to the franchisor. Have the lease, supply agreements, financing arrangements, licence agreements and other commitments reviewed to identify restrictions, required consents and exit costs.

With help from the appropriate professional advisers, document the conversion work, the allocation of costs and the conditions for using the new brand. If temporary adaptations are permitted, specify their scope, deadline and review process: a vague concession leaves both parties’ obligations unclear.

4. Maintain continuity for customers and staff

The value of the existing business includes relationships that a rebrand can either strengthen or damage. Before the transition, draw up a record of bookings, advance payments received, gift vouchers, loyalty schemes and outstanding customer support requests. Define who will handle each commitment and explain any changes clearly to customers, without suggesting that obligations still in force have been cancelled.

Customer data also requires care: joining a franchise network does not automatically authorise sharing the customer database with the franchisor. Before migration, check data protection roles, purposes, lawful bases and privacy notices under the General Data Protection Regulation, or GDPR.

Involve staff by explaining which practices will remain and which will change. Finally, schedule a readiness check before the new signage goes up: the products or services must be available, staff trained, existing commitments manageable and communications ready.

In practice: approve the conversion only when there is an agreed plan setting out actions, costs, responsibilities and verifiable conditions. Bringing an existing business into a franchise network means supporting a transition, not merely replacing the brand.