commercial law

Franchising advice for businesses and individuals

What is franchising?

Franchising sees a firm roll out its business model through other operators.

In return for a fee, the franchisor allows other parties to use its trademark and distribute or sell its goods or services.

Some of the most famous and successful businesses in the world, such as McDonalds, have grown through a franchise model. It can be an effective way to develop a business without absorbing additional overheads from extra staff, property and resources.

What are the benefits of franchising?

Entering a franchise agreement has many benefits for both the franchisor (i.e. the company owning the overarching brand allowing others to run a location of its business) and the franchisee (i.e. the individual who purchases the rights to use a company’s name and business model).

For the franchisor it enables rapid growth without incurring high costs, while retaining close control of the overall company and business model.

For the franchisee, it offers the opportunity to manage a business without the risks associated with setting up a completely new company as the business concept is already proven. The franchisee also benefits from additional support the franchisor may provide, which could include training and advertising.

What needs to be considered in a franchise agreement?

From intellectual property to licensing arrangements, from profit share to company structures, there are many factors that need to be covered in a franchise agreement.

Financial details should also be outlined. Usually, the franchisee will pay the franchisor royalties (typically an initial fee and ongoing service fees) based on a percentage of turnover or mark-up on supplies.

How much or how little control the franchisor wants over its potential business partner will also affect the scope of the franchise agreement.

A solicitor who specialises in franchise law will be able to advise on what needs to be included in the franchise agreement and outline both parties’ obligations.

The franchise agreement is usually incorporated into the franchise or operations manual, which lays out all the information needed to run the franchise. Matters outlined in this document can include employment issues, customer service standards, stock requirements, accounting details and pricing.

How can we help?

Whether you’re buying or selling a franchise, looking for advice on a franchise agreement or want some general franchise information, Wallace Robinson & Morgan can help.

Please get in touch with our commercial team:

ask for Paul Hughes on 0121 705 7571, or

email: paulhughes@wallacerobinson.co.uk

Further reading:

Business Formation (Commercial Law)

What you need to know about joint ventures (Commercial Law)

This article is for general information purposes only. It does not constitute technical, financial, legal advice or any other type of professional advice and is no substitute for specific advice based on your individual circumstances. We do not accept responsibility or liability for any actions taken based on the information in this article. For more information, please click here.