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When you have a business concept that you want to grow quickly and without capital investment, offering franchises can be a good option. JMW Solicitors can provide franchise legal advice to help your business make the most of this opportunity.
Our commercial law team works with both franchisors and franchisees, ensuring that the legal rights of all parties are protected and that partnered businesses are able to work together constructively to achieve the best results from this arrangement.
For legal advice on any aspect of franchising, get in touch with our expert franchise lawyers by calling 0345 872 6666. Alternatively, you can fill in our online enquiry form to request a call back at your convenience.
How JMW Can Help
At JMW, our franchising solicitors have considerable experience of advising both franchisors and franchisees in relation to their proposed arrangements. Our services cover a range of areas, including:
- Drafting, reviewing and updating franchise agreements
- Assisting with the setup of a new franchise network and structure
- Advising on the sale and purchase of existing franchise businesses
- Resolving disputes between franchisors and franchisees
- Managing any data rights issues that arise as part of the franchise relationship, including post-termination
In particular, we advise franchisors on:
- Protecting their intellectual property
- Measures for ensuring that a rogue franchisee does not undermine the rest of the network
We also advise franchisees on issues such as:
- Protecting their investment, both in terms of cash and time spent
- Ensuring they receive the support they require from the franchisor
Our team has worked with local and international franchise networks of all sectors and sizes, and will provide you with tailored legal guidance to help you achieve the business results you desire.
What is Franchising?
Franchising allows a company to take its unique business model and offer franchisees the right to replicate this in a new area. The franchisee will generally obtain the property and fund any capital works.
This can be repeated in a number of different territories, allowing the franchisor to expand quickly and into areas where the business may not have felt comfortable operating in before. In return for offering the franchisee the right to replicate their business model, the franchisor normally receives a royalty payment based on the income generated in the franchisee’s area.
Other key elements of the franchising model include:
- The franchisor allows the franchisee to make use of their brand name
- The franchisee operates the business in accordance with the franchisor’s key business concepts, making the franchisee’s business indistinguishable from the franchisor’s in the eyes of the consumer
- The franchisor maintains quality control oversight over the franchisee
- The franchisor provides ongoing support and assistance to the franchisee
Many entrepreneurs are keen to explore franchise options, as they see this as a way to own their own business with the safety net of a tried-and-tested business model. The franchising model, therefore, allows for fast growth, backed by hungry franchisees.
What are the key benefits of the franchise model?
For a franchisor, the advantages of launching a franchise network are potentially considerable:
- It allows the company to expand its reach and distribution network further and faster, without needing to set up divisions in new areas
- The franchisee will operate using their own capital, reducing the financial risk associated with expansion
- The franchisee will take personal responsibility for driving the success of the franchisor’s business, and be highly motivated to do so
For franchisees, the benefits are equally clear:
- It allows them to start a business without the same level of management experience or sector expertise that would be required to start one from scratch
- They can take advantage of the proven success, reputation and marketing reach of the established brand name to drive quick success
- They will often have more finances available to them than most start-up businesses, as well as practical support from the franchisor
What are the potential disadvantages of the franchise model?
Those entering into a franchise model should be aware of a few potential risks and downsides. For franchisors, these include:
- A partial loss of control over business activities undertaken by the franchisee under their brand’s name
- The costs associated with providing ongoing support to their franchisees
- The need to share key information about their internal business processes and strategies with third-party franchisees
Meanwhile, for franchisees, possible risk factors include:
- The franchisor maintaining a degree of control over the way they do business
- The need to pay royalties to the franchisor on a long-term basis
- Restrictions that may affect their ability to sell or pass on a successful franchise business
- The knock-on impact that the business failures of the franchisor can have on the franchisee network