- John Deane
- Updated: Tue, 22nd Nov 2016
A franchise solicitor maximises your position, and if the franchising model does not work as planned, extricates you with minimum exposure. A franchise allows the use of their intellectual property in return for cash and agreed contractual measures designed not to ruin the brand.
Our franchising service includes but is not limited to:
We work with businesses of all sizes across multiple sectors and have experience in assisting:
- Businesses seeking to secure franchise agreements from franchisors;
- Franchisors who grant franchise agreements; and
- Franchisors or franchisees extricating themselves from franchise agreements.
It’s not just large brands who operate franchises. Many clients first contacted us when they were embryonic businesses.
Drafting franchise agreements
The key legal issues in a franchise agreement are:
- Intellectual property rights;
- Obligations imposed on each party;
- Benefits of the model to each business;
- Viability of the franchise model;
- Termination of the franchise agreement.
The franchising system has three critical components. The:
- Operating process which delivers the brand’s promise; and
- On-going support and training that enables franchisees to grow.
An established franchised business model in one country might be replicable in other countries. We have good experience of the enforceability of franchise agreements in other jurisdictions, e.g. the European Union and elsewhere. Lear from franchising mistakes to ensure that your model is viable and ready for market.
The franchising legal framework
Franchising a business is an arrangement by the intellectual property owner:
- To grant the right to use and exploit the intellectual property rights on agreed terms and conditions;
- With the owner retaining ownership of the intellectual property.
It usually gives the right to:
- Operate the business in the franchisee’s territory,
- Licence the intellectual property rights for operating the business;
- Provide training, technical support and mentoring.
For the franchisor, intellectual property can include:
- Trade mark(s)/brand;
- Patent(s) on equipment and software used in the business;
- Copyright in the instruction manuals;
- Design rights in the marketing materials;
- Operations manuals;
- Confidential information;
- Know-how and operating procedure; and
- Database and marketing knowledge.
Piloting the franchise
Often, we support a franchisor who pilots their franchise model. Usually, the franchisor establishes a subsidiary that acts like a franchisee. We also prepare and implement piloting strategies that protect your brand.
A start-up could negotiate a franchise from an established business, even though the established business is not yet an established franchisor. We often approach established business to enquire as to the possibilities. This model cuts development costs, which releases investment funds for marketing, premises and machinery.
Benefits of franchising
Franchising a business gives an ability to expand into other products and geographical markets. In addition, franchising:
- Helps to create additional revenue streams and offers a competitive advantage.
- Depending on the type of the business, it reduces the risk involved in manufacturing, promoting and selling the products in an unfamiliar geographical market.
- A franchised business can enhance consumer loyalty and goodwill along with the benefit of retaining ownership and control over the use of intellectual property assets vested in the business.
- A franchisor will have increased purchasing power and be able to reduce overheads. This may in turn lead to an increase in the profitability of small units.
Franchising a business can increase the franchisor’s employee motivation and retention by linking sales to remuneration, particularly where the franchisor is involved in the supply of goods or services.
Benefits of becoming a franchisee
Once a suitable business offering franchising opportunities is selected, there are many benefits to franchise owners which are not normally available to other businesses, such as:
- Franchisees do not have to have general business or management skills, or specialised knowledge in the particular field – this is generated through the franchisor.
- The risk of the business’s failure is reduced.
- Assistance and training is usually given throughout the term of the franchise.
- The franchisee acquires free goodwill and brand reputation – increasing the likelihood of the business’s success.
The franchisee has reduced working capital requirements and usually does not need to secure as much funding as a business starting wholly from scratch. We will consider the structure of finance for you and advise on tax efficient incentives for investors if applicable under SEIS and EIS.
Franchising track record
We act for franchisors and franchisees of all shapes and sizes. Our experience and expertise is applied in the review and drafting of franchise agreements through to resolution of disputes and termination of the franchise agreement.
- Franchise agreement for franchisor, a café company expanding across London and the South East.
- Obtained franchise agreements for start-up health food distribution business, so it could utilise the franchisor’s reputation.
- Pilot franchise for national takeaway business planning EU expansion. Later, our client granted franchises to entities in Paris and Munich.
- Enforcement for children’s toy company against a franchisee in breach; and then:
- Tax reliefs for children’s toy company after it restructured its franchising model.
Franchising is big business these days. Many large businesses started franchising from a small beginning. Companies of all sizes may be interested in your intellectual property. What we can do is take you through the process of maximising the franchising opportunity by sharing our experience.