Franchising Lawyers & Solicitors – Franchise Agreements & Disputes.

In order to decide whether taking on a franchise is the best decision for you, it is essential that you have some understanding of the perceived advantages and disadvantages of franchising. The advantages can include:-

• it is your own business, subject to the franchisor controls under the Franchise Agreement and Operations Manual
• someone else has already had the bright idea and it has been proven in the marketplace
• there will often be a familiar brand name which should have existing customer loyalty
• you appear to be part of a large organisation which generates confidence in customers and suppliers
• there may be a national advertising campaign
• some franchisors offer training in selling and other business skills
• some franchisors may be able to help secure funding for your investments as well as discounted bulk buy supplies

The potential disadvantages can include:-

• it is not always easy to evaluate the quality of a franchise especially if it is relatively new
• extensive enquiries may be required to ensure a franchise is strong, which can be an expensive and time consuming process
• a percentage of your annual turnover will have to be paid to the franchisor by way of an annual fee
• the rights of the franchisor, for example to inspect your premises and records and dictate certain methods of operation, may seem unnecessarily onerous and restrictive
• you may be obliged to purchase some or all of the products to be used in the business from the franchisor
• should the franchisor fail to maintain the brand name or meet other commitments there may be very little you can do about it

There are many factors you will need to take into account when choosing a franchise. These can include:-

• your own strengths and weaknesses – make sure they are compatible with the franchise. Does the franchisor provide any training or support to improve your business skills?
• the business’s strengths and weaknesses – thoroughly investigate the business you are planning to buy
• local competition – research the local competition and make sure there is demand for the product or service in the region
• the franchisor – most importantly, either take up references directly or ask for references from existing franchisees. Are they happy with how things are going and with the level of support from the franchisor? Make sure you get a full list of the existing franchisees and not just those hand picked by the franchisor
• tax and financial aspects – talk to an accountant about the financial projections for the business (cash flow, working capital needs and profit projections) and draw up a business plan

For franchisees it is important to understand the consequences and implications of entering into a Franchise Agreement and to make sure that the franchise being granted accurately reflects your commercial understanding. In particular, Lanyon Bowdler can advise on and undertake the following:

• the implications of a proposed Franchise Agreement
• negotiations with franchisors to achieve the best possible terms
• a review of any Operations Manual and the business terms and conditions you will be required to comply with so that you understand their implications and your exposure
• exit strategies, settlement agreements and the enforceability of restrictive covenants

Before making any commitment, or paying any money, it is essential that prospective franchisees make the right choices and seek the correct advice from solicitors who understand the complex commercial and legal issues involved in franchising. At Lanyon Bowdler our commercial law team has that experience. For more information on franchising or if you would like us to review a Franchise Agreement on a fixed fee basis please contact us.