EXPERTADVICE
How can I make sure my franchisees are getting the best deal with loans?
Franchisors wanting to secure the best possible deal for their franchisees should ensure that all the bank’s franchise departments are kept up to date with any developments in the franchise model and network. If the bank hasn’t received any recent update from the franchisor then they will be basing their decision to fi nance a new franchisee on historic information, which may not show the franchise opportunity in the best possible light.
It is important for franchisors to have a
relationship with all of the banks to ensure that their franchisees have the widest possible choice for funding their business plans. Each bank may have a different approach to a particular brand or industry sector so it is important to understand how each bank will
approach funding new franchisees to your own network. Referring all franchisee enquiries to just one bank will result in less choice for the investor. To secure the best deal and most
professional support it is essential that all franchisees are directed to speak to the bank’s franchise team in the fi rst instance and they shouldn’t make contact with their local bank manager directly. Banks are likely to offer better terms to franchisees of brands where a track record has already been established. Therefore, if there are a number of established franchisees in the network operating good bank accounts and meeting their fi nancial commitments, new franchisees are likely to secure better terms than someone approaching a bank where no track record has been established. Don’t narrow your franchisees’ options and make a resolution to contact the franchise teams of each bank to ensure that your franchisees are securing the best possible deal.
RICHARD HOLDEN
Richard Holden is head of franchising at Lloyds Banking Group
One of my franchisees hasn’t informed me whether or not they want to renew their agreement. The contract has one month to run and I am not sure what I can do in these circumstances?
JANE MASIH
Jane Masih is director and head of franchising at Owen White Solicitors
The fi rst step is to check the terms of the franchise agreement. It is likely that the franchisee will have a contractual option to renew the franchise, subject to certain conditions being satisfi ed. A typical renewal condition will require the franchisee to have given written notice of their intention to renew. I suggest you write to the franchisee and request that they contact you within the next seven days to discuss the situation, reminding them that the franchise agreement requires
them to give written notice, which you have not received. It may be that the franchisee is unaware of the formal process required under the terms of their franchise agreement and assume if they do nothing that the licence will simply continue on the same terms as before. If they do not respond you should then notify them in writing that the licence will expire at the end of the current term and that the provisions on termination will apply. To avoid further such incidents it is recommended to contact franchisees well in advance of their renewal dates to ensure that they know exactly what is required for them to fulfi l the conditions to renew. You should also remind them of the consequences if they do not exercise their option to renew or satisfy the contractual conditions as set out in the franchise agreement.
If you would like to ask our experts a question please email
fnews@vmgl.com Franchisor News | 17
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