Define the scope of your franchise offering before expanding

When an established business builds a franchise network, not everything it does needs to be included. Ancillary services, bespoke orders and the founder’s personal projects may be profitable without belonging in a shared offering. Before drawing up agreements, you therefore need to decide exactly which activities franchisees will be entitled and required to carry out. Clear boundaries make it easier to explain what the relationship actually covers.

Separate the core offering from the rest of the business

Start by mapping out what your business currently sells. Look at actual customer work and deliveries, not just the headings on your website. Two services marketed together may require very different skills, equipment and levels of effort.

Then divide the business into three groups:

• Shared core offering: products or services that every franchisee must be able to deliver.
• Optional extras: offerings that may be included by separate agreement once specified conditions have been met.
• Activities outside the franchise rights granted: activities not covered by the franchisee’s right to use the concept and brand.

A service business might, for example, handle routine jobs, advanced troubleshooting and consultancy assignments that rely on the founder’s specialist expertise. There is no reason to assume that all three should be included from the outset. If specialist assignments are excluded, you must also make clear who can handle those enquiries and what the franchisee should tell the customer.

For each part, ask: Can we clearly describe what will be delivered? Can another business owner deliver it with the support we provide? Will the customer understand what is included? If the answers are unclear, the offering needs to be defined more precisely before it is presented to a prospective franchisee.

Describe both the right and the obligation

A franchisee being allowed to sell a service is not the same as being required to offer it. That distinction needs to be explicit. Otherwise, you may expect a full range while the franchisee assumes they can choose only the simplest elements.

Prepare a short offering sheet for each part of the core range. Describe:

• the customer need the service or product is intended to meet,
• what standard delivery includes and excludes,
• whether the offering is compulsory or optional,
• any specific resources or expertise required,
• which departures from the standard offering require express approval.

Also explain how optional extras become available. If specific training or equipment is required, for example, franchisees should know this before planning their business. Avoid phrases such as “our entire concept” if, in practice, different franchisees have access to different parts.

The scope should describe what rights are being granted, rather than replace instructions on how to carry out the work. It should be understandable even to someone who has not yet read an operations manual. A useful test is to ask someone outside the business to explain what the franchisee will sell after reading the description.

Test the boundaries with specific customer scenarios

The most difficult questions often arise where two offerings meet. A customer orders a standard service but wants to add something the franchisee is not authorised or qualified to provide. Decide how to handle such situations before they become part of everyday life in the franchise network.

Work through a few specific scenarios:

1. A customer wants to buy a service offered only by the franchisor’s own business.
2. A customer wants to combine the core offering with an extra that the local franchisee does not offer.
3. A franchisee wants to sell their own complementary service under the shared brand.
4. An enquiry includes both work covered by the concept and work outside it.

For each scenario, there should be a clear answer as to who provides the quotation, who the customer contracts with and who is responsible for delivery. If an enquiry is passed on, the customer should understand that a different contracting party may take over.

Also distinguish between a franchisee’s own services offered under the shared brand and activities they carry out separately. Any restrictions on other business activities need legal assessment; defining the scope of the concept does not automatically give you the right to prohibit all other business ventures.

Make the scope clear before signing an agreement

Sweden has an Act on Franchisors’ Duty to Disclose Information (2006:484). It requires franchisors to provide clear, understandable written information about the meaning of the agreement and other relevant circumstances well before the franchise agreement is concluded. This information must include a description of the franchise business the franchisee will operate.

Defining the offering in concrete terms helps you provide that description. It should be possible to understand which parts are included from the outset, which are optional and which fall outside the rights granted. If an optional extra involves specific financial terms, these also need to be clearly stated.

The disclosure legislation is no substitute for a carefully drafted franchise agreement. General rules, including Swedish contract law and competition law, may also affect the terms. Have a lawyer with franchise expertise review how the rights, obligations and restrictions are expressed.

Practical takeaway: Create a simple list with three columns: compulsory, optional and outside the concept. If you cannot clearly place each offering in one of them, it is too early to promise a prospective franchisee access to “the entire business”.