Joint venture franchising


Partnering for success in high-investment and global markets F


ranchising is widely known as a flexible model for business growth and brand expansion


at pace. A major advantage of franchising is the various franchise models available to suit particular business requirements. Franchise models include: • Business format franchises • Product distribution franchises • Management franchises • Investment franchises • Joint venture franchises At Ashtons Franchise


Consulting, our role is to draw on our expertise and consider which model – or models – best suits the business operations for our clients. Once that is established, the model can be developed and the commercial terms agreed so that a compelling, sustainable and profitable franchise operating platform can be launched. Here, Charlie Dickson


focuses on joint venture franchising. This is a lesser- known franchise model but has proven highly successful in certain business sectors.


What is a joint venture [JV] franchise? A joint venture franchise is a collaborative approach that essentially assigns a franchise to a joint venture company. The JV company is owned jointly between the franchisor and the


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 oint enture nchise is a ehicle here a nchisor an nchisee ointl inest in a nchise startup his ors ell here the startup cape is hih hich coul otherise restrict hihcalire eperience prospects rom oinin the nchise usiness


JV partner franchisee under a Shareholder Agreement which details the equity that each party holds in the new venture. The equity stake can vary depending on the investment that each party holds in the JV company (50/50, 60/40, etc). Profits are shared based on the equity held by each party. The JV company signs the


Franchise Agreement and operates the franchise under the terms, systems, processes and operating methods specified by the franchisor – in the same way as any other franchisee.


Why use a JV model? Charlie comments: “Personally, I have experience of working with franchise brands who successfully operated a JV model. Typically, a JV franchise works best when the investment to set up a new venture is on a high level – for example, retail stores, automotive sector, healthcare, professional services


where expensive equipment and/or store fit out is required.” In cases where the franchise


investment level is significant, it can create a barrier to entry for suitably experienced candidates who can’t raise the necessary funds. A joint venture franchise is a vehicle whereby a franchisor and a franchisee jointly invest in a franchise start-up. JV franchise models work well where the start-up capex is high, which could otherwise restrict high- calibre, experienced prospects for joining the franchise business.


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