Franchise Advice
Signing on the dotted line
Shelley Litchfield of Fraser Brown explains what you need to know before committing to a franchise
T
here are many advantages to joining a franchise instead of setting up your own business from scratch. For example:
• It can be quicker to set up and make successful than a new business, which in turn reduces your working capital requirements
• Start-up finance may be more readily available as the brand is well known
• You may be able to make use of franchisor’s purchasing power and take advantage of economies of scale
• As the franchise is already established, the risk of business failure is substantially less than starting a new business.
One of the most important matters for you to consider before joining a franchise business is the success and reputation of the franchisor’s business and brand. Your success as a franchisee hinges on the franchisor’s business and is directly affected by the actions and solvency of the franchisor. As a first step, therefore, you should investigate the business and financial condition of the franchisor.
Franchise agreement
Once you have chosen your franchise and are satisfied that it’s the right business for you, you will be required to enter into a franchise agreement (sometimes known as
“Your success as a franchisee hinges on the franchisor’s business and is directly affected by the actions and solvency of the franchisor”
By way of guidance, some of the
key issues covered in the franchise agreement include:
• Rights – what rights are being granted? Is the territory in which you may operate sufficient? Is the territory exclusive to you, or can the franchisor sell, or appoint others to sell, in the same territory?
• Fees – what fees are you required to pay? What is the initial fee? Are
a licence agreement) with the franchisor. The franchise agreement is one of the most important documents in a franchise business, as it, alongside the manual, will regulate the terms on which you operate the franchise business. It is, therefore, important that you understand from the outset exactly what the obligations of both you and the franchisor are. This will help you confirm that the franchise is right for you and assess the profitability of the business.
there any continuing fees, such as a marketing levy?
• Term – how long will the agreement last? Is there a right to renew?
• Sale – can you sell your franchise business? If so, what is the process involved?
• Termination – when and how can the agreement be terminated?
• Restrictions – are there any restrictions on what you can or can’t do outside of the franchise business, both during the agreement and after?
• Onerous and unusual terms – are there any terms within the agreement that are particularly onerous or unusual and therefore need careful consideration?
The franchise agreement is likely to
be a long and complex document. You should therefore seek advice from a franchise specialist before committing yourself. Remember – you will be bound by what you sign. n
SHELLEY LITCHFIELD
Shelley Litchfield is a franchising solicitor at Fraser Brown. Fraser Brown acts on behalf of franchisors and franchisees giving advice on setting up a franchised business, franchise property, associated commercial contracts, employment and company issues.
October 2013 |
Businessfranchise.com | 23
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96 |
Page 97 |
Page 98 |
Page 99 |
Page 100 |
Page 101 |
Page 102 |
Page 103 |
Page 104 |
Page 105 |
Page 106 |
Page 107 |
Page 108 |
Page 109 |
Page 110 |
Page 111 |
Page 112 |
Page 113 |
Page 114 |
Page 115 |
Page 116 |
Page 117 |
Page 118 |
Page 119 |
Page 120 |
Page 121 |
Page 122 |
Page 123 |
Page 124 |
Page 125 |
Page 126 |
Page 127 |
Page 128 |
Page 129 |
Page 130 |
Page 131 |
Page 132 |
Page 133 |
Page 134 |
Page 135 |
Page 136 |
Page 137 |
Page 138 |
Page 139 |
Page 140 |
Page 141 |
Page 142 |
Page 143 |
Page 144 |
Page 145 |
Page 146 |
Page 147 |
Page 148 |
Page 149 |
Page 150 |
Page 151 |
Page 152 |
Page 153 |
Page 154 |
Page 155 |
Page 156 |
Page 157 |
Page 158 |
Page 159 |
Page 160 |
Page 161 |
Page 162 |
Page 163 |
Page 164 |
Page 165 |
Page 166 |
Page 167 |
Page 168 |
Page 169 |
Page 170 |
Page 171 |
Page 172 |
Page 173 |
Page 174 |
Page 175 |
Page 176 |
Page 177 |
Page 178 |
Page 179 |
Page 180 |
Page 181 |
Page 182 |
Page 183 |
Page 184 |
Page 185 |
Page 186 |
Page 187 |
Page 188 |
Page 189 |
Page 190 |
Page 191 |
Page 192 |
Page 193 |
Page 194 |
Page 195 |
Page 196 |
Page 197 |
Page 198 |
Page 199 |
Page 200 |
Page 201 |
Page 202 |
Page 203 |
Page 204 |
Page 205 |
Page 206 |
Page 207 |
Page 208 |
Page 209 |
Page 210 |
Page 211 |
Page 212 |
Page 213 |
Page 214