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If you are considering starting a franchise or are operating as a new franchisor, understanding standard practices and legal implications in franchising is crucial. Whether you are launching a brand-new concept or expanding an existing business, franchising industry insights are valuable. This article dives into essential legal considerations and helpful tips for new franchisors.
1. Have a Solid Business Model
Before franchising, new franchisors should have a solid business plan and have tested whether it works in practice. A well-defined business model is crucial for attracting franchisees.
Your plan should include a clear and detailed description of the following:
- your franchise concept;
- target market;
- financial projections; and
- growth strategy.
2. Franchising Standards and Best Practices
As you are new to franchising, you should familiarise yourself with franchising best practices. The UK does not have any specific laws that regulate franchising. However, several franchise associations self-regulate the industry and set expected standards.
One of these associations is the British Franchise Association (BFA). The BFA has a Code of Ethics that regulates its franchisor and franchisee members. This document outlines aspects such as:
- the content of franchise agreements;
- that parties should deal with each other in good faith;
- franchisees should adhere to any pre-contractual agreements, such as a non-disclosure agreement; and
- franchisors should only franchise proven business models.
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3. Seek Legal Advice
New franchisors should always seek legal advice before entering into any legally binding franchise agreements and establishing a franchise system. A franchising lawyer can guide you through your legal obligations, review contracts and identify potential risks. They can also advise whether your plans or existing operations are legally sound.
Beyond seeking legal advice, ensure that you take proactive measures to avoid the risk of costly future legal disputes. These steps can include:
- implementing quality control measures;
- maintaining the necessary insurance coverage; and
- creating a transparent dispute-resolution framework and setting this out in the franchise agreement.
4. Draft Legal Documents
A lawyer can draft the essential legal documents on your behalf. However, if you have already drafted your franchise agreement and a franchise operations manual, having an experienced legal professional review them is a good idea. Your franchise agreements should be clear and outline your rights and responsibilities. They should also specify those of the franchisee. They should also include information about the fee structure, training and support provisions and territory rights.
The franchise operations manual should be detailed, explaining key processes and information about your franchise concept. Franchisees can use this document to support their training and development and use it as a first port of call should they need help.
5. Protect Your Intellectual Property
It is crucial to protect your intellectual property, including your:
- logo;
- slogan;
- artwork; and
- unique and technical business processes.
You can register your trade marks and apply for patents through the Intellectual Property Office (IPO).
6. Recruit Carefully
Your recruitment decisions are crucial to long-term success when forming a franchise network. You must carefully screen and consider prospective franchisees. Any potential candidate should have the necessary skills and experience to operate a franchise location within your brand successfully.
This handbook covers all the essential topics you need to know about franchising your business.
7. Stay Competitive and Encourage Innovation
A franchisor’s role is rarely hands-off. The business world is competitive and constantly evolving. Once you have brought a franchise network to life, you must give it the best chance of success. You should conduct ongoing research into changing trends and continually evaluate your business model in light of market dynamics.
You must keep your franchise concept flexible and responsive whilst building your brand’s image. Use the marketing fund wisely and invest in generating quality marketing materials. Support and collaborate with franchisees to develop marketing campaigns to attract their local target market.
A good franchising practice is to enable franchisees to collaborate and share know-how and best practices. Generating a culture of collaboration from the early stages allows franchisees to improve their businesses continually. Their feedback can also help you hone your approach to the franchise system.
Key Takeaways
Starting a franchise is an exciting journey. However, it is essential to approach franchising with a thorough understanding of industry expectations and legal implications. Franchising success requires ongoing learning and adaptation.
Essential points new franchisors should know include the following:
- successful franchise networks start with a proven business model;
- the franchise associations, including the BFA, set franchising standards and best practices;
- a lawyer can help you ensure your plans and operations are legally sound;
- have a robust franchise agreement and operations manual;
- protect your intellectual property to safeguard your brand’s image;
- select prospective franchises whose skills and experience align with your brand and franchise concept; and
- provide comprehensive support to franchisees and enable them to collaborate with you and each other.
If you are a new franchisor, who would like legal advice about franchising, our experienced franchise lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
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