Corporate & Commercial Solicitor Paul Longland recently joined Frettens, bringing with him over 30 years of experience as Partner at another local firm.

Here, Paul utilises his expertise in commercial law to answer your questions on franchising, including the pros, cons and his advice.

What is franchising in business?

Franchising, in business, is where a company (franchisor) allows another party (franchisee) to use their know-how and brand name and sell their products.

The third party will either pay a one-time or monthly/annual fee to the franchisor in return for using the brand.

McDonald’s is probably the most well-known example of a franchise. This company allows many third parties to use their brand name and sell their products around the world. They also operate their own outlets in parallel.

What types of business can be franchised?

All sorts of businesses can be franchised if they involve the supply of goods or services, but especially if their market is the consumer or small business market.

You might be surprised at some of the famous names, and variety of different businesses, that use franchising; for example Skechers, Costa Coffee and Pandora all use franchising.

What are the advantages of franchising your business?

Below, we’ve listed some of the biggest advantages of franchising your business.

• Your own business – You can make decisions about how the business is run, recruitment and future decisions.
• Profitability – Franchises can, and have proven to be, very profitable.
• Low-risk – Franchises are usually low-risk, as you’ll be running a business which has proven to be successful in the past and has a well-oiled business model in place.
• Support – Franchisors often have major support systems in place, both financial and non-financial.

In addition, franchises also provide instant brand recognition, better access to financing, greater buying power, access to supply chains and much more.

What are the risks with franchising my business?

For the person taking out a franchise:

• The franchise fee can be very high.
• They’ll need to check the franchisor’s track record very carefully.
• Normal trading risks, employment obligations and may need to register for VAT.
• May not be able to sell the business without permission from the franchisor (sometimes a transfer fee may be payable).

For the person granting a franchise, the key element is to select capable franchisees who will be prepared to enhance the goodwill of the brand by operating in a professional way.

Training may be needed. Also, for retail type businesses, the location can be critical.

Intellectual property, such as trademarks, logos, know-how, software, designs copyrights and recipes may be critical to the business and should be protected by registration where possible.

How does a franchise get paid?

The franchisee is normally responsible for all outgoings, and keeping the proceeds from the business, but part of the turnover is normally payable to the franchisor as a franchise fee.

There may also be sums payable by way of contribution to central advertising and publicity.

How do I franchise my business?

In the full article, Paul goes into much further detail into how to franchise your business. You can read it here.

Or, if you’d like to speak to Paul for advice, you can get in touch on 01202 499255. We offer a free 30 minute consultation for all new clients.