Whether you are a franchisor or a franchisee our franchising expert can assist you. Below we set out the services we can provide.
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When you run a business that delivers quality, you can’t afford to drop the ball, and your franchise network needs to run like clockwork. We understand that not only is it crucial that you have the right franchisees in your network, but you need robust franchise agreements in place, and strategic commercial support from your legal team.
Whether you already have an established franchise network, or you’re in the early stages of this growth strategy, our specialist team will provide the expert advice you need for a happy and prosperous franchise network.
Are you about to take on a franchise, or perhaps you already run a franchise but need specialist legal help with your agreement?
Taking on the running of a business means both a financial and emotional investment so having the right legal support is crucial. Whether it’s getting your franchise agreements right, support through the buying process or commercial advice on the running of your franchise, our in house specialist can help get you and your franchise to where you want to be.
If you are taking a franchise we can review your franchise agreement (typically 40-60 pages long) and produce for you a comprehensive, written report on a competitive, fixed fee basis. Our report will advise on the key aspects of the franchise agreement and appraise you of any particularly onerous or unusual provisions.
The majority of franchise agreements are non-negotiable, however we see our role as ensuring you fully understand the financial and personal obligations you are signing up to. If any negotiations with the franchisor are required we can assist with these on your behalf for an additional charge. We have experience advising prospective franchisees in a wide variety of business sectors and are on the panel of recommended lawyers for Toni & Guy franchisees.
What is a franchisor?
A franchisor will have an already established business that it wishes to expand. It will do this by selling to a franchisee the right to sell its original products and/or services using its branding, expertise, ‘system’ and intellectual property for a set period of time, typically within a specified geographical area (the ‘territory’).
What is a franchisee?
A franchisee is a small business owner who has purchased the right to use the trademarks, branding, knowledge and ‘system’ of an existing business in order to market and sell the same branded products/services and uphold the same standards as the first business.
Franchisees become owners and independent operators of third-party outlets/branches called franchises, which are essentially replicas of the first business.
How can you start a franchise business?
If you have an existing business which you believe you could grow and expand through franchising, the British Franchise Association (BFA) website is a good place to start for prospective franchisors. The BFA run courses for those interested in franchising – either as a franchisor or a franchisee and their website is a wealth of useful information for those starting out. You will need an experienced franchise consultant to guide you through the process and assist you in getting your processes and ‘operations manual’ in place. The BFA has a list of accredited service providers to the franchise industry.
Also crucially important will be protective legal documents drafted for you by a solicitor specialising in franchising. You will also need to protect your intellectual property with trademarks if you do not already have these registered. Please see our blog.
If you are interested in becoming a franchisee, exhibitions are held each year attended by franchisors keen to sell their franchises. Research what type of franchise business you are interested in and what the financial commitment is. Due diligence is key. When you have a copy of the proposed franchise agreement, ensure that you get a franchise solicitor to review it for you and advise you on its key terms, your obligations and liabilities – this will be money well spent. Please see our blog.
How does a franchise agreement work?
The franchise agreement is the document that governs the relationship between a franchisor and a franchisee. In the absence of specific franchising laws in the UK, that relationship is almost exclusively governed by contract law principles.
The agreement sets out the rights that a franchisee has, the roles and responsibilities of the parties and plenty more besides. Franchise agreements will vary substantially depending on the franchise network and the lawyer drafting them, however most tend to follow a similar template. They are lengthy and complex documents and a drafted in favour of the franchisor, hence why it is so important franchisees fully understand what they are signing up to.
How much money do you need to start a franchise?
This will vary from franchise to franchise. For a small, working from home business you may pay less than £10,000 in respect of an upfront initial fee to cover your licence, training and any equipment needed plus (typically) a monthly management and/or marketing fee for the duration of the franchise term of around 10% of your turnover. At the other end of the spectrum a well-known fast food franchise could cost you an upfront fee of £250,000 plus.
How can you finance a franchise business?
From your own savings (many franchisees enter franchising after receiving a redundancy pay out) and/or many of the main banks in the UK, specialise in franchise finance. We would recommend seeking finance through their dedicated franchise departments for the best service. Members of the BFA include HSBC, Natwest, Lloyds Bank and Barclays.
Is a franchise a sole trader?
A franchisee can operate as a sole trader (particular if turnover is anticipated to be low) however many franchisees incorporate a limited company, in order to benefit from limited liability, so far as their customers and suppliers are concerned. Note that typically if the franchisee does this, the franchisor will require that the human being(s) behind the franchisee company (usually the shareholders and directors) personally guarantee the obligations of the franchisee company.
How do I sell my franchise business?
The franchise agreement should set out a fairly strict procedure to be followed in the event the franchisee wishes to sell its franchise business. Typically, the franchisee must not be in breach of any of the terms of the franchise agreement and the franchisor will need to approve the incoming purchaser and ensure that they sign a new franchise agreement. There may be fees involved for both the outgoing and incoming franchisee and again, the Agreement will cover this.
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