Franchise Q&A
[A] Before setting up, expect basic information about the market size
the franchisor operates in and its market position. This should include a demographic profile of who their product/ service appeals to. Be prepared to do your own local research on competitors – it’s vital to assess threats and opportunities when considering where to base your business. Will you have access to onsite support via a franchise manager who will advise you on local activities to raise your business profi le and provide ongoing training? A frequent visit (weekly at the start) is invaluable and demonstrates continuity of support. Once you’re signed up, expect to
receive a central promotional plan, which outlines group advertising, marketing and PR activities for the year. This should include a pricing structure, consumer or trade brochures, POS materials and the benefi t of an already established website. You need to know when the materials are updated and re-issued. Will this be your responsibility or the franchisors? Marketing is a powerful tool in business success and franchisor support is key to your future. Assess your marketing package by using the above as a tick list and calculate the cost of buying the expertise in independently. If the services help to build the franchise brand you’re buying into, you know it’s adding value to your business.
[Q] Many franchises are divided into territories, however with a retail franchise, do I get a territory? How am I protected from other franchisees setting up near me?
[BIO] JOHN PRATT
is a solicitor and partner in
Hamilton Pratt.
[A] The length of time taken to obtain a loan varies according to the complexity
of the deal and the type of franchise being December/January 2012 |
Businessfranchise.com | 17
[A] About 65 to 75 per cent of franchisees receive some sort of territorial
protection, which prevents their franchisor from appointing another franchisee in their territory or competing with franchisees in their territory. Having said this, exclusive territories are not as exclusive as they once were. The Internet, which all franchisees are permitted to use does not, of course, respect territorial boundaries and it is a fundamental principal of EU and UK competition law that a franchisee cannot be prevented from responding to an unsolicited enquiry from a prospective customer outside his territory. In retail franchises, exclusive territories
are not usually given simply because franchisors find it difficult to predict the demand for their products. Franchisees have to establish at an early stage whether the franchisor is, in practice, likely to allow additional retail premises to be opened when there is insufficient demand – usually this really does not make sense for a retail franchisor who would simply be cannibalising sales at one store and transferring it to another. Accordingly in many retail franchises whilst the franchise agreements do not contain any contractual protection for a franchisee, the commercial reality does give franchisees, on a practical level, a substantial amount of protection.
[Q] On average how long does it take to secure money for a franchise investment? How many meetings can it involve and what are the different stages?
[BIO] CATHRYN HAYES
Cathryn is the head of franchising for HSBC Bank.
Contact details
Email your questions to:
editor@businessfranchise.com
purchased. For example, if a property lease is required or the bank requires security, such as a charge on a property, this can take longer than for a franchisee starting a low-cost business from home. Typically the bank can provide an
agreement in principle within 48 hours of meeting the customer, providing it has all of the information required. The bank will always try to work to the timescales of the individual franchisee; a recent example is where we provided a £1 million facility to a franchisee and the funds were available within a couple of weeks of the fi rst bank meeting. Franchisees can help speed up the
process by ensuring they have fully completed their business plan before approaching the bank. They will also need to have completed a cash flow forecast that takes into account their working capital requirements, before their business starts to generate a profit. By providing all of the necessary information the bank will be able to assess the franchisee’s request quickly and effectively. Franchisees should also keep their
franchisor informed of progress and any additional information the bank requires as it may be able to provide this or offer guidance.
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