Table of Contents
Franchising can enable you to grow and scale your brand quickly. However, setting up a franchise in the UK requires careful planning and compliance with several legal obligations. This article will outline the essential legal requirements for starting a franchise business in the UK. By understanding these requirements, you can better understand the steps you must take at the start of your franchising journey to operate your franchise successfully and compliantly.
1. Drafting a Comprehensive Franchise Agreement
Franchise agreements are the most important legal document when setting up a franchise. They form the cornerstone of your franchise business model. This legally binding contract outlines the terms of the relationship between you and your franchisees. You must carefully draft it, ensuring it covers all aspects of the franchise relationship.
The following table outlines critical aspects to include in your franchise agreement.
| Aspect of the Agreement | Explanation |
| Fees and payments | You should clearly define the franchisee’s financial obligations, including the initial franchise fee, royalty payments, and marketing contributions. |
| Territory rights | You should specify whether the franchisee will have exclusive or non-exclusive rights to operate in their particular geographic area. |
| Duration and renewal | Set out the length of the franchise term and the conditions for renewal or termination of the agreement. |
| Training and support | You must outline the training and support provisions you will provide the franchisee. |
| Use of intellectual property | To protect your intellectual property, such as your trade marks, trade secrets, and proprietary systems, clearly state how the franchisee can use them. |
2. Drafting a Franchise Operations Manual
You must also draft a franchise operations manual. Within this document, you will outline how franchisees should run their business. You will explain your business model in detail and elaborate on aspects of the franchise agreement.
Drafting this manual will help refine your business model, translating it into understandable text that franchisees can read and then action in their businesses. It is important to remember that you should already have a successful business model. You should have successfully piloted this model for at least a year before beginning to expand your brand through franchising.
This handbook covers all the essential topics you need to know about franchising your business.
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3. Protecting Your Intellectual Property
Your franchisees will be able to use your intellectual property. They will pay for this right through the initial fee and ongoing royalties. While not a strict legal requirement, protecting your intellectual property is critical for franchisors. The British Franchise Association (BFA) stipulates that franchisors must own their intellectual property for at least the duration of the franchise agreement.
You should protect your intellectual property by registering your trade marks and patents with the Intellectual Property Office (IPO). You can protect other forms of intellectual property through the franchise agreement.
4. Industry-Specific Requirements
There is a diverse range of franchise businesses in the UK. Depending on the industry in which your franchise operates, you may need to adhere to specific regulatory requirements and obtain particular licences to enable your franchisees to operate in new locations.
Your franchise agreement should include industry-specific requirements, licensing obligations, and health and safety standards. For example, if you are starting a restaurant or cafe franchise, you will need to comply with food safety regulations and ensure your franchisees obtain licenses such as:
- food hygiene certificates;
- alcohol licences; and
- planning permission for premises.
Moreover, all franchisors must consider health and safety measures and how their franchisees will uphold high standards. For any business with physical premises, franchisees must adhere to the relevant health and safety regulations. These include fire safety, risk assessments, and upholding employee welfare standards.
Key Takeaways
Starting a franchise business in the UK involves understanding various legal requirements. These include the following:
- drafting a comprehensive franchise agreement;
- drafting a franchise operations manual;
- protecting your intellectual property; and
- complying with industry-specific requirements.
In the absence of franchise-specific laws in the UK, you have a greater responsibility to ensure that your business practices and agreements comply with existing legal frameworks. By seeking expert legal advice, you can build a strong foundation for your franchise business, minimise risks, and focus on growing your brand.
If you require legal advice about franchising your business, our experienced franchise lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers who can answer your questions and draft and review your documents. Call us today at 0808 196 8584 or visit our membership page.
Frequently Asked Questions
The franchise operations manual is a comprehensive document informing franchisees how to run a business under your brand. Within it, you will explain your business model in detail and elaborate on aspects of the franchise agreement.
While not a strict legal requirement, protecting your intellectual property is critical for franchisors. The British Franchise Association (BFA) stipulates that franchisors must own their intellectual property for at least the duration of the franchise agreement.
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