Thinking of investing in a Franchise?
Speak to Hugh Middlemass who has been advising clients on Franchise Agreements for over 25 years. Whether you are a Franchisee or a Franchisor, he can guide you through the intricacies of the agreement, that could form the basis of your livelihood for many years to come.
YOUR QUESTIONS ANSWERED
What is a Franchise Agreement?
Although it can take a number of different forms, a franchise is usually the grant of a licence by a franchisor to a franchisee for the franchisee to trade their own business under the brand of the franchisor.
What is the benefit of a Franchise Arrangement?
The franchisor should have a proven business model and provide the franchisor with a package of business tools to enable the franchisee to hit the ground running and not having to re-invent the wheel. This should enable the franchisee to:
- be up and running sooner than starting a business from scratch
- reduce lead times and thus reduce working capital and improve cash flow
- reduce risk
- improve the chance of funding
- benefit from the franchisor’s marketing and advertising
- have access to the franchisor’s market and business knowledge.
Why would Franchisor want to Franchise their business?
The advantages from the franchisor’s point of view can be:
- to establish its name and reputation more quickly and with a faster geographical spread
- that the franchisees will provide funding for their own businesses and reduce funding the cost of expansion for the franchisor
- to improve purchasing power.
What are the issues you need to consider as either the Franchisee or Franchisor?
For both franchisor and franchisee there will be issues which affect each differently, for example:
- control – to what extent can the franchisor impose control over the franchisee and how that franchisee runs its own business
- IP rights and confidentiality – the franchisor will need to protect its methods and operations
- initial and ongoing support and training – the franchisee will typically be looking for these elements to make up for its own lack of knowledge and experience. The provision of support and training will often be a new skill which the franchisor will have to acquire
- the initial price and terms of payment
- how long will the licence last and what will be the terms of renewal
- can the franchisee sell his business and, if so, on what terms
- maintenance of quality
- what royalties or other payments are required from the franchisee and how they are calculated
- stock and stock control
- how will the agreement be terminated if it is not working, what will be the consequences of termination and will the franchisor wish to restrict the franchisee from competing if the agreement is terminated. Franchising can bring significant benefits to both parties if done right.
If you are thinking of becoming a franchisee or setting up a franchise, contact Hugh Middlemass on 0113 320 5000 for a no obligation chat