Blacks Solicitors’ Commercial Law team is highly skilled at drafting, and reviewing, bespoke Franchise Agreements for clients.
The term ‘franchise’ has arisen from the development of what is traditionally called ‘business format franchising’.
This is the granting of a Licence by one person (the Franchisor) to another (the Franchisee), which entitles the Franchisee to trade as their own business, under the brand of the Franchisor (by following an often proven business model).
The Franchisee receives a package, comprising all the elements necessary to establish a previously untrained person in the business and to run it (with continual assistance on a predetermined basis). The Franchisee will also periodically make payments to the Franchisor.
The Franchisor will allow the Franchisee to use a name which is associated with them while continuing to exercise quality control over the Franchisee.
Frequently Asked Questions
What are the advantages for a Franchisor?
- Advantages include the opportunity to secure distribution for products or services faster than if the Franchisor was to train up its own employees and develop its own policies
- The use of a Franchisee’s capital will expedite the expansion of a network more quickly
- The Franchisee’s financial well-being is heavily linked to the success of the Franchisor’s business
What are the disadvantages for a Franchisor?
- Whilst the Franchise Agreement will impose restrictions on Franchisees, they are still independent third parties seeking to maximise their profits, possibly at the expense of the Franchisor
- The Franchise Agreement will contain restrictions on the Franchisee’s ability to make use of business know-how and confidential information for their own purposes, but such provisions are often difficult to monitor and enforce
- The skills required to control and support Franchisees often differ from those involved in operating a business using employees
What are the advantages for a Franchisee?
- Assistance and training is shared throughout the term of the Franchise by the Franchisor
- Finance may be more readily available to Franchisees than those setting up in business on their own
- Franchisees don’t require general business or management skills, or specialised knowledge in the proposed business activity
- The Franchisee can make use of the Franchisor’s purchasing power and other benefits depending upon the size of the Franchisor’s operation
- The Franchisee receives the benefit of national advertising coverage undertaken by the Franchisor
- Finally, through taking advantage of the Franchisor’s name and reputation the lead time in making a business successful may be reduced
What are the disadvantages for a Franchisee?
- A Franchisee is subject to substantial control from the Franchisor
- The Franchisee’s operation will be affected by the actions or insolvency of the Franchisor
- A Franchisee will have to pay mark-up and/or royalties on the goods or services which he receives from the Franchisor and/or his nominated supplier
- Finally, there may be onerous restrictions on the Franchisee’s ability to sell the franchised business
For more information about Franchise Agreements, or to find out how Blacks’ Commercial Law team can help you, please email or call us today on 0113 207 0000.