Franchises can be an effective and lucrative way of scaling and expanding a business. They also offer third-parties the opportunity to harness the pre-existing customer-base and brand awareness of a well-known business. A win-win for everyone involved. That being said, franchises represent a fairly complex legal relationship that must be managed carefully to ensure everyone’s interests are protected. That’s why a franchise lawyer is so important. If you’re still not convinced, read on. In this article, we’re walking you through everything you need to know about franchises and franchise lawyers.
What is a franchise?
To get to grips with what a franchise solicitor does, you first need to know what a franchise is. Franchising is how a business can give permission to a third-party to do business using their trademark and brand. This means the ‘franchisee’ can start trading under the ‘franchisor’s’ name and use their business model and system.
Franchisor vs Franchisee
The franchisor is the party that already has an established business and wants to license their business name and format to other parties.
The franchisee is the party that takes up that license and starts to trade under the franchisor’s name, using their business format.
Different types of franchise
Here’s a quick overview of the different franchise models you might come across:
1. Business Format Franchise
A business format franchise is where the franchisor offers franchisees a kind of ‘package deal’. This means that the franchisee is set up with everything they might need to start trading and doing business successfully.
2. Management Franchise
A management franchise is a franchise model in which the franchisor maintains high-level control and the franchisee undertakes the day-to-day management of the business.
3. Product Distribution Franchise
Under a product distribution franchise, the franchisee sells and distributes the franchisor’s product, still under the franchisor’s brand name.
4. Manufacturing franchise
Finally, a manufacturing franchise is where the franchisee obtains a license to manufacture and produce goods using the franchisor’s name.
Advantages of a franchise
1. Established business name & model
From a franchisee’s perspective, the opportunity to start trading and doing business under an established business’ name is invaluable. They get to benefit from the franchisor’s pre-existing credibility, brand awareness, and loyal customers. Additionally, since the franchisor has already set up a working business model and infrastructure, the franchisee doesn’t have to do very much to get things off the ground.
2. High rate of success
According to the British Franchise Association, franchisee business have a very low failure rate compared to standalone businesses.
3. Support network
Under some franchise agreements, the franchisor offers their franchisees ongoing support and training in how to do business under their name.
4. Easy way to grow your business
For franchisors, franchising offers a great way to diversify and expand their business indirectly.
Disadvantages of a franchise
1. Under-performing franchises
Though this isn’t the outcome for every franchise, it can happen that underperforming franchises begin to weigh on the franchisor. This can impact your overall brand identity or do a disservice to the image you’ve established for yourself.
2. Compliance and liability concerns
When launching and operating a franchise, there are some compliance and legal issues that you need to protect yourself against. That’s why it’s so important to work with a dedicated franchise lawyer.
3. Management responsibilities
Lastly, though a franchise is, in many ways, a great way to grow your business with a ‘hands off’ approach, franchisors will need to invest time and energy into managing their franchise. This can take up more time than expected, especially if the franchise does well.
Franchise Law in the UK
Currently there are no franchise-specific laws in England and Wales. A franchise agreement will be affected and governed by contract laws, as well as any relevant case law.
The British Franchise Association (BFA) plays a big role in helping franchises to self-regulate. BFA members have to abide by and fulfil the organisation’s standards and regulations.
Reasons To Hire A Franchise Lawyer
If you’re thinking about starting a franchise, it’s definitely a good idea to speak with an expert franchise lawyer. Here are a few reasons why:
1. Bespoke advice
No two business are identical. The same goes for franchises. A franchise lawyer can advise you on launching and managing a franchise based on your specific circumstances and business profile.
2. Drafting a franchise agreement
A franchise lawyer will also play a critical role in helping you to draft a watertight franchise agreement that properly protects your interests, whilst ensuring that franchisees are able to thrive under your brand name.
They will also be on hand to edit and amend your franchise agreements as your needs shift and change.
3. Ongoing support & representation
Your involvement doesn’t end when you’ve signed your franchise agreement. That’s why a franchise lawyer who can offer you ongoing support is so important. They can help you to navigate disputes and queries, when and if they should arise.
FAQs about Franchises
1. What are the 4 types of franchise?
The four different franchise types are: business format franchise, manufacturing franchise, product distribution franchise, and management franchise.
2. What is a franchise example?
Some famous franchises include McDonalds, Dominos and Pizza Hut.
3. What is the difference between a franchise and an independent business?
The biggest difference between a franchise and an independent business is the amount of autonomy the business-owner has. A franchisee is bound by their franchise agreement and must abide by its terms. By contrast, an independent business owner can make decisions about how they run their business freely.