Franchise Your Business
Business expansion: the legal issues
Fiona Boswell highlights the key legal points to help your business grow faster by franchising
T
here are a number of things to consider from a legal perspective if you want to franchise your business. Here are the five most important things:
Protect your brand Your brand is the key asset in franchising your business. You won’t have strong rights to defend it if it isn’t a registered trademark. It is vital that you choose a one 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 good and capable of registration are ones like Apple and EE, where the name doesn’t describe the service or product.
Protect your business To franchise a business it should ideally be proven and successful. Before you think of franchising it, you should protect it from the operation of the franchise by ringfencing. One of the ways 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 franchised one. You will need to build up a new operational team. This is because franchising a business is a full time job in itself; it takes considerable time and effort to franchise a business well.
Sort out your contracts This is vital because the franchise process is documented in the form of legal contracts. The initial contracts are a suite of start-up ones that effectively define the relationship between you and your franchisee. The key document is the pilot contract, which is the agreement between you and the franchisee. These tend to be quite heavily weighted in your favour. It is vital to have a deposit contract, pilot contract, robust supply and premises contracts in place for your franchise to operate properly.
Check your marketing materials 12 |
www.franchisornews.co.uk
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. Your marketing materials must not overstate what you are capable of as a franchised business. There are also laws that apply to how you can describe your business, so it is imperative you check your marketing materials very carefully.
Think with the end in mind As with any business model, if you are considering franchising your business then you should give some thought to your exit plan. Think from the very start about how you are going to structure the business, how long you are going to operate the franchise for, 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.
Franchising a business successfully requires careful thought about your brand, business structure, robust contracts and exit planning. Fraser Brown Solicitors will be on stand G40 at The National Franchise Exhibition at the NEC, Birmingham, on 13 and 14 October. Fiona Boswell will deliver her speech ‘Franchising: the FB guide to the legals you need to know’ at the event on the Friday. n
Fiona Boswell
Head of the franchising team and QFP Fraser Brown Solicitors
fboswell@fraserbrown.com
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