EXPERTADVICE JANE MASIH
Jane is head of franchising at Owen White solicitors. Jane has in excess of 25 years’ experience of advising franchisors in the development of their franchise networks, including drafting franchise agreements and master licence agreements, acting in the sale and purchase of franchise businesses and intellectual property matters.
Now that my network is established we are being asked to help with resales – each one is proving a nightmare, how can I simplify the process?
The key to dealing with your franchise
resales is to develop a project plan that all your team understands. It is likely that your franchise agreement will contain fairly detailed provisions about what the franchisee must do when they wish to sell the business.
Many franchisors require the outgoing and incoming franchisees to enter into a standard form of sale agreement whether for an asset sale or sale of shares. This enables the franchisor to ensure a standard process is adopted that ties in with their franchise agreement. It also ensures that reasonable provisions are in place to protect the incoming franchisee and make sure that the sale is conditional upon the incoming franchisee entering into a new franchise agreement with the franchisor. The resale contract will usually have three parties: the franchisor, the incoming and the outgoing franchisee. The franchisor can control the fl ow of purchase funds and guarantee that the outgoing franchisee pays all fees due up to completion, including any sales commission where the franchisor has been directly involved in introducing the purchaser.
It is also worth noting that It is common practice for the resale contract to provide that the franchisor’s legal costs in relation to the sale are paid by the incoming and outgoing franchisee.
How do I demonstrate to prospective franchisees that my business model is a reputable, ethical operation?
An ethical franchise has fi ve key elements: PIP WILKINS
Pip is head of operations at the British Franchise Association (bfa). Prior to this taking on this role, Pip held a number of managerial positions within the Association, including several years as its events manager and then as business development manager. Her experiences both in the office and on the road have given her an exceptional depth of knowledge of ethical business format franchising.
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it’s transferrable to different locations; teachable to others; information is disclosed unambiguously to prospective franchisees; it adheres to the European Code of Ethics for franchising; and it’s a viable, proven business with a history of success and a level of profi t that can sustain a franchise network – not just an idea in your head.
One of the best ways to demonstrate your commitment to franchising ethics is to apply for and gain bfa membership, which involves an accreditation process that looks in detail for evidence of the above and more, and provides signifi cant credibility to your business. In addition, you should be open and honest in your dealings with prospective franchisees
– from the terms of any deposit you request through to training and support and answering any and all questions that arise. Show proof of your success and ensure that fi nancial projections for franchisees are based strictly on already-achieved fi gures (either by the company or other franchisees). Break down your start-up fees to show that your profi t as a franchisor comes from your franchisees’ success – not from selling franchises. Your recruitment process should include facilitating prospects being able to speak with any existing franchisee in your network.
Being selective yourself about who you accept as a franchisee also demonstrates that you have standards at the heart of your franchise operation.
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