Franchising is a form of business expansion which is characterised by the exploitation of the franchisor’s intellectual property rights. A franchisor will licence its trademarks and know-how to enable the franchisee (an independently owned business) to provide goods and services using a business format which has been developed by the franchisor under the terms of a detailed and comprehensive franchise agreement.
As a business model it offers companies a means to expand their territorial footprint, whether domestically or internationally, without over-leveraging their business financially or administratively, and without diluting their brand identity and business values.
The franchise model has the attraction of apportioning both finance and risk between the franchisor and a franchisee and can assist the franchisor to expand into a new market or sector. Because the business model will have been tried and tested, it will provide franchisees with a competitive edge when compared with non-franchised businesses. A franchisor should have proven that the system works and providing a franchisee follows that system, they should succeed.
Our team at Excello works with franchisors and franchisees to help them understand the opportunities offered by franchising. We can draw up comprehensive franchise and related commercial agreements and assist franchisors on all legal issues faced, including, how to manage and effectively deal with franchise disputes, advise on intellectual property aspects, re-sales, commercial leases and commercial law issues.
Advice to franchisors:
- Setting up and structuring franchise businesses
- Expansion and acquiring other franchisors
- Auditing franchise recruitment material to reduce risk of mis-selling claims
- Advising on, reviewing and amending franchise and related commercial agreements
- Dispute avoidance and managing disputes
- Intellectual property, brand and data protection
- Advising on renewals
- Assignment and re-sales
- Termination and rights arising thereafter
- Interim injunctions to seek compliance with restrictive covenants
- And all related commercial agreements
Advice to franchisees:
We work with franchisees to help them understand their obligations and risks offered by franchising and are able to assist with:
- Reviewing franchise agreements
- Owning and operating multi-unit/brand franchises
- Pre-contractual documentation
- What does your contract mean
- Disputes & termination rights
- Advice of what happens after termination
As our lawyers are instructed by franchisors and franchisees, we understand their respective needs, view points and the bargaining positions of parties involved in any franchise deal.
In the UK, the best known industries using franchising models for their businesses include restaurants and fast food outlets, coffee shops, pubs and bars and petrol stations. The franchising movement is also present in many other fields, prominent examples being, the healthcare, retail, education, childcare sectors, hotels and catering, postal services, health clubs, personal and business communication services.
Franchising contributes about £17.1 billion towards the UK economy, which equates to around 1% of GDP and has grown at a rate of about 50% over the last decade. There are about 50,000 franchise units with over half of franchises declaring an average turnover of over £250,000. The future of franchising appears bright thanks to an increase in younger franchisees entering the sector. Over 30% of franchises are female owned. (Source bfa/NatWest franchise survey).