Could you expand your business via a franchise?
What will be my obligations if I enter into a franchise agreement?
When we think of a franchise we automatically think of fast food outlets. In fact, almost any type of business that you can think of may be operated as a franchise. Since the recession, the franchise industry has grown significantly in the UK.
A franchise must have an established business model that is transferable and can be taught to others. Usually, it will also have a brand that is protected. Generally speaking, the British Franchise Association requires that the business is proven to work for at least 12 months before you can franchise it to others.
As a franchisor, you will need advice on registering your brand trademark and how to take steps against anyone, especially potential or former franchisees, copying your get-up or business model. We will advise you on the franchise agreement itself including:
- the company structure for the franchisor
- any requirement for personal guarantees
- fee structure – initial and continuing fee calculation and payment
- any advertising charges
- termination and transfer arrangements
- insurance liabilities
- accounts in order to calculate fees
- definition of territory
- intellectual property – licensing of trade marks etc
- restrictions on competition by the franchisee following termination
Alternatively, if you are considering investing in a franchise, you will need advice on the risks and liabilities involved in entering into the arrangement. In addition to the initial up-front fees, you may also be liable for continuing or ongoing support and marketing. You may also be required to take on a lease of premises or enter into a personal guarantee. If you wish to sell the franchise later, there may be restrictions and costs payable to the franchisor.
If you are considering setting up a franchise, the commercial team at Myers & Co can assist you in ensuring that your brand is secure, and in preparing the franchise documentation. If you are considering joining a franchise, please let us review the documents to ensure that there are no hidden surprises.
Based in Stoke-on-Trent, Staffordshire, our commercial lawyers have a reputation for providing accurate advice, and dealing with complex problems in an efficient manner. To find out more, contact us on 01782 577000.
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