ADVICE


Good judgement pays off


Fiona Boswell gives her top five legal tips to help your business thrive as a franchise


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There are a number of things to consider if you want to franchise your business. Here are the five most important:


Protect your brand Your brand is the key asset in franchising your business. It is really important that your brand is capable of registration as a trademark, as you won’t have strong rights to defend it if it isn’t registered. So it is vital that you choose a brand that is distinctive, ie not descriptive of what you do, and register it where you intend to franchise. By non-descriptive I mean not calling your business ‘The Door Company’ if you sell doors. The kinds of brands that are capable of registration are ones like Apple or EE, where the name doesn’t describe the product or service.


Registering your trademark requires you to make an application to the Intellectual Property Office. This is something solicitors can help with or it is something that you can do yourself. But it is something that you should investigate if you are considering franchising your business.


Protect your business To franchise a business you should ideally be successful. Before you think of franchising, you should protect your business by ring-fencing. One way to do that is to set up a new company that operates your franchise. This protects your existing business from anything that might happen with your franchise business, and should be done from the outset. In terms of ring-fencing, there are other issues that you should consider; for example,


you will need to build up a new operational team that can continue to run your existing business successfully. This is because franchising a business is a full-time job in itself – it takes considerable time and effort to do it well.


Sort out your contracts This is vital because the franchise process is documented in the form of legal contracts. There is a suite of initial start-up contracts that effectively define the relationship between you and your franchisee. There are a number of contracts that form part of the process. Firstly, a pilot contract, which is the contract between you and the franchisee. These tend to be quite heavily weighted in your favour.


Other contracts that are necessary are deposit contracts. These mean the franchisee needs to give you some financial commitment towards franchising and being part of your


brand. The franchise brand is a key asset and having a deposit contract, pilot contract, supply contracts and other key documentation in place is fundamental for your franchise to operate properly.


Check your marketing materials It is very important that you don’t promise what you can’t deliver in your marketing materials, whether from a financial perspective or otherwise. In particular, when you start out you won’t necessarily have many operational franchised outlets on which to base any financial projections, so they need to be very carefully drafted. There are also laws that apply to how you can describe your business.


Think with the end in mind As with any business model, if you are considering franchising your business then you should have an exit plan in place. Think from the very start about how you are going to structure the business, how long you are going to operate the franchise, and when you will want to dispose of it. These are all key factors in structuring your business properly. So think with the exit in mind. This comes into play both in how you structure the franchise and how you deal with property aspects. Think about what your rights will be when the franchise comes to an end. Franchising a business successfully requires careful thought about your brand, business structure, robust contracts and exit planning. n


Fiona Boswell


Head of commercial services Fraser Brown Solicitors fboswell@fraserbrown.com


Author


Fiona Boswell is head of commercial services and franchising at Fraser Brown Solicitors. She advises businesses on the legalities required to franchise a business.


Franchisor News | 21


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