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2 Minutes to find your Franchise Match

5 Top Tips for Budding Franchisees

July 22nd, 2011 by Fiona Boswell in Franchise Legal

Fiona Boswell - Senior Associate Solicitor, Freeth Cartwright LLP

Fiona Boswell – Senior Associate Solicitor, Freeth Cartwright LLP

1. Make sure your contract reflects the deal.

Your contract should contain all the key details about your franchise. From the simple facts – the name – to the key points eg. your territory, fees etc. If something isn’t covered it can be quite difficult (i.e costly) and in some cases, impossible to get a franchisor to honour that deal.

2. Get a fixed fee review and report from a Bfa affiliated lawyer. lawyers that specialise in franchising vetted by the British Franchise Association).

Your franchise contract is long and will be more favourable for the franchisor. It is key you understand what you are signing.  Franchises are often granted for a minimum of 5 years and (unless you sell the business) you won’t be able to get out of it early  even if you don’t like it/you cant make it pay.

3. Make sure you the own the contents of your website.

Social networking is a key part of any marketing strategy. This also applies to franchises. Most businesses engage contractors to design their websites. If you do this, legally although you are paying for the work, the designer owns the content. This can cause all sorts of problems particularly when you want to sell your business.

4. Have policies in place with staff.

As a franchisee if you have staff you are responsible for their actions. If staff use customer data improperly or abuse social networking sites to damage your brand not only can the franchisor terminate your contract but, you are often financially responsible for any damage caused.

5. Get advice before competing with your Franchisor.

Successful franchising is rewarding.  At that stage you may be tempted to go it alone – set up your own business and divert your custom to it. Legally this could put you in hot water (even if your contract has ended) as most franchise contracts prevent you from doing this for a limited time (up to one year).

Fiona Boswell is a Senior Associate Solicitor at Freeth Cartwright LLP and Head of FC Franchise Build, Manage, Grow, Exit ™ Unit. You can contact Fiona on 0845 070 3812 or e-mail fiona.boswell@freethcartwright.co.uk

Whilst every effort has been made to ensure the accuracy of this article, it does not provide complete coverage of the subjects referred to, and it is not a substitute for professional legal advice and should not be relied upon as such.
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2 Responses to “5 Top Tips for Budding Franchisees”

  1. John Charles Says:

    Dear Fiona
    Thanks for 5 Top Tips, very useful.
    In your capacity and bearing in mind current market conditions have you noted an increase in small business franchisee start-ups.(Capital investment less than £40K).

    Also,with respect to Franchisor stipulated contract terms have you experienced any conditions that would amount to Unfair Terms for the Franchisee.

    I ask the above because it seems that an element of trust for good working relations needs to exist, yet where money, time and effort/legal responsibilities are concerned do the risks out-weight the benefits.

    I have noted an increase in Franchisor businesses offered but my enquiries are often unable to gain realistic income/profit gains over expenditure. What is your view on this crucial aspect of business enquiry/ownership.
    Many thanks

  2. Fiona Boswell Says:

    Hi Charles,

    There is definitely an increase in small business franchise start ups at the moment.

    There are certainly terms including in franchise contracts that a franchisee might consider unfair but that can be justifiable from the franchisors perspective. This perspective is changing slightly with the influx of new franchisors that are prepared to be more flexible on the terms agreed than existing franchisors have been.

    Understanding how to run your franchise business profitably is a key part of your franchise due diligence when choosing a franchise. Good franchisors are relatively transparent about this within reason but given the current economic climate it is understandably difficult to predict.

    I hope this helps.

    Regards

    Fiona